The market seemed underwhelmed by last week's earnings announcement from Juewei Food Co., Ltd. (SHSE:603517) despite the healthy numbers. Our analysis suggests that shareholders might be missing some positive underlying factors in the earnings report.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Juewei Food's profit was reduced by CN¥136m, due to unusual items, over the last year. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Juewei Food to produce a higher profit next year, all else being equal.

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 Juewei Food's Profit Performance

Because unusual items detracted from Juewei Food's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Juewei Food's statutory profit actually understates its earnings potential! At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. At Simply Wall St, we found 1 warning sign for Juewei Food and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of Juewei Food's profit. But there are plenty of other ways to inform your opinion of a company. 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.