Jiangxi Sanxin Medtec Co.,Ltd. (SZSE:300453) announced strong profits, but the stock was stagnant. We did some digging, and we found some concerning factors in the details.

The Impact Of Unusual Items On Profit

For anyone who wants to understand Jiangxi Sanxin MedtecLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥41m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Jiangxi Sanxin MedtecLtd.

Our Take On Jiangxi Sanxin MedtecLtd's Profit Performance

Arguably, Jiangxi Sanxin MedtecLtd's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Jiangxi Sanxin MedtecLtd's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 52% per annum growth in EPS for the last three. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. At Simply Wall St, we found 1 warning sign for Jiangxi Sanxin MedtecLtd and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of Jiangxi Sanxin MedtecLtd's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. 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.