The market was pleased with the recent earnings report from Zhuhai Rundu Pharmaceutical Co., Ltd. (SZSE:002923), despite the profit numbers being soft. We think that investors might be looking at some positive factors beyond the earnings numbers.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Zhuhai Rundu Pharmaceutical's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥41m 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 that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Zhuhai Rundu Pharmaceutical to produce a higher profit next year, all else being equal.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Zhuhai Rundu Pharmaceutical.

Our Take On Zhuhai Rundu Pharmaceutical's Profit Performance

Because unusual items detracted from Zhuhai Rundu Pharmaceutical's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Zhuhai Rundu Pharmaceutical's earnings potential is at least as good as it seems, and maybe even better! Unfortunately, though, its earnings per share actually fell back over the last year. 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 want to do dive deeper into Zhuhai Rundu Pharmaceutical, you'd also look into what risks it is currently facing. To help with this, we've discovered 4 warning signs (1 doesn't sit too well with us!) that you ought to be aware of before buying any shares in Zhuhai Rundu Pharmaceutical.

This note has only looked at a single factor that sheds light on the nature of Zhuhai Rundu Pharmaceutical'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 that insiders are buying.

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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.