Shandong Jincheng Pharmaceutical Group Co., Ltd's (SZSE:300233) robust recent earnings didn't do much to move the stock. However the statutory profit number doesn't tell the whole story, and we have found some factors which might be of concern to shareholders.
The Impact Of Unusual Items On Profit
For anyone who wants to understand Shandong Jincheng Pharmaceutical Group's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥30m worth of unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And that's as you'd expect, given these boosts are described as 'unusual'. If Shandong Jincheng Pharmaceutical Group doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Shandong Jincheng Pharmaceutical Group.
Our Take On Shandong Jincheng Pharmaceutical Group's Profit Performance
Arguably, Shandong Jincheng Pharmaceutical Group's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Shandong Jincheng Pharmaceutical Group's statutory profits are better than its underlying earnings power. The good news is that, its earnings per share increased by 34% in 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'd like to know more about Shandong Jincheng Pharmaceutical Group as a business, it's important to be aware of any risks it's facing. While conducting our analysis, we found that Shandong Jincheng Pharmaceutical Group has 1 warning sign and it would be unwise to ignore this.
Today we've zoomed in on a single data point to better understand the nature of Shandong Jincheng Pharmaceutical Group'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.
