Shanghai Ziyan Foods Co., Ltd.'s (SHSE:603057) recent weak earnings report didn't cause a big stock movement. We think that investors are worried about some weaknesses underlying the earnings.
The Impact Of Unusual Items On Profit
Importantly, our data indicates that Shanghai Ziyan Foods' profit received a boost of CN¥111m in unusual items, over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. We can see that Shanghai Ziyan Foods' positive unusual items were quite significant relative to its profit in the year to September 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.
That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.
Our Take On Shanghai Ziyan Foods' Profit Performance
As we discussed above, we think the significant positive unusual item makes Shanghai Ziyan Foods' earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Shanghai Ziyan Foods' underlying earnings power is lower than its statutory profit. And we are pleased to note that EPS is at least heading in the right direction in the alst twelve months. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. If you'd like to know more about Shanghai Ziyan Foods as a business, it's important to be aware of any risks it's facing. To that end, you should learn about the 2 warning signs we've spotted with Shanghai Ziyan Foods (including 1 which is significant).
This note has only looked at a single factor that sheds light on the nature of Shanghai Ziyan Foods' profit. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
