The market was pleased with the recent earnings report from Fujian Yongan Forestry(Group)Joint-Stock Co.,Ltd. (SZSE:000663), despite the profit numbers being soft. However, we think the company is showing some signs that things are more promising than they seem.

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Fujian Yongan Forestry(Group)Ltd's profit was reduced by CN¥89m, 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. In the twelve months to September 2024, Fujian Yongan Forestry(Group)Ltd had a big unusual items expense. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Fujian Yongan Forestry(Group)Ltd.

Our Take On Fujian Yongan Forestry(Group)Ltd's Profit Performance

As we mentioned previously, the Fujian Yongan Forestry(Group)Ltd's profit was hampered by unusual items in the last year. Because of this, we think Fujian Yongan Forestry(Group)Ltd's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! Unfortunately, though, its earnings per share actually fell back over the 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 Fujian Yongan Forestry(Group)Ltd, you'd also look into what risks it is currently facing. While conducting our analysis, we found that Fujian Yongan Forestry(Group)Ltd has 2 warning signs and it would be unwise to ignore them.

This note has only looked at a single factor that sheds light on the nature of Fujian Yongan Forestry(Group)Ltd'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. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful.

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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.