Investors were disappointed by PharmaBlock Sciences (Nanjing), Inc.'s (SZSE:300725 ) latest earnings release. Our analysis has found some reasons to be concerned, beyond the weak headline numbers.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that PharmaBlock Sciences (Nanjing)'s profit received a boost of CN¥74m in unusual items, over the last year. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. Which is hardly surprising, given the name. We can see that PharmaBlock Sciences (Nanjing)'s positive unusual items were quite significant relative to its profit in the year to June 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On PharmaBlock Sciences (Nanjing)'s Profit Performance

As we discussed above, we think the significant positive unusual item makes PharmaBlock Sciences (Nanjing)'s earnings a poor guide to its underlying profitability. For this reason, we think that PharmaBlock Sciences (Nanjing)'s statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. Sadly, its EPS was down over 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. 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 3 warning signs for PharmaBlock Sciences (Nanjing) and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of PharmaBlock Sciences (Nanjing)'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 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.