Soft earnings didn't appear to concern Sichuan Lutianhua Company Limited By Shares' (SZSE:000912) shareholders over the last week. Our analysis suggests that while the profits are soft, the foundations of the business are strong.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Sichuan Lutianhua Company Limited By Shares' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥77m 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. Sichuan Lutianhua Company Limited By Shares took a rather significant hit from unusual items in the year to September 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 Sichuan Lutianhua Company Limited By Shares.

Our Take On Sichuan Lutianhua Company Limited By Shares' Profit Performance

As we discussed above, we think the significant unusual expense will make Sichuan Lutianhua Company Limited By Shares' statutory profit lower than it would otherwise have been. Based on this observation, we consider it possible that Sichuan Lutianhua Company Limited By Shares' statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. In terms of investment risks, we've identified 2 warning signs with Sichuan Lutianhua Company Limited By Shares, and understanding them should be part of your investment process.

This note has only looked at a single factor that sheds light on the nature of Sichuan Lutianhua Company Limited By Shares' 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.