Investors signalled that they were pleased with Shanghai Shenqi Pharmaceutical Investment Management Co., Ltd.'s (SHSE:600613) most recent earnings report. Looking deeper at the numbers, we found several encouraging factors beyond the headline profit numbers.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Shanghai Shenqi Pharmaceutical Investment Management's profit was reduced by CN¥71m, 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 that's hardly a surprise given these line items are considered unusual. Shanghai Shenqi Pharmaceutical Investment Management took a rather significant hit from unusual items in the year to December 2023. 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 Shanghai Shenqi Pharmaceutical Investment Management.

Our Take On Shanghai Shenqi Pharmaceutical Investment Management's Profit Performance

As we discussed above, we think the significant unusual expense will make Shanghai Shenqi Pharmaceutical Investment Management's statutory profit lower than it would otherwise have been. Because of this, we think Shanghai Shenqi Pharmaceutical Investment Management's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! And on top of that, its earnings per share increased by 22% in 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. To help with this, we've discovered 3 warning signs (1 is concerning!) that you ought to be aware of before buying any shares in Shanghai Shenqi Pharmaceutical Investment Management.

This note has only looked at a single factor that sheds light on the nature of Shanghai Shenqi Pharmaceutical Investment Management'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.