Even though YuanShengTai Dairy Farm Limited's (HKG:1431) recent earnings release was robust, the market didn't seem to notice. Investors are probably missing some underlying factors which are encouraging for the future of the company.

The Impact Of Unusual Items On Profit

For anyone who wants to understand YuanShengTai Dairy Farm's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥662m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. YuanShengTai Dairy Farm took a rather significant hit from unusual items in the year to June 2024. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of YuanShengTai Dairy Farm.

Our Take On YuanShengTai Dairy Farm's Profit Performance

As we discussed above, we think the significant unusual expense will make YuanShengTai Dairy Farm's statutory profit lower than it would otherwise have been. Because of this, we think YuanShengTai Dairy Farm's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! And it's also positive that the company showed enough improvement to book a profit this year, after losing money last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. If you want to do dive deeper into YuanShengTai Dairy Farm, you'd also look into what risks it is currently facing. For example - YuanShengTai Dairy Farm has 3 warning signs we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of YuanShengTai Dairy Farm's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. 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.