The subdued market reaction suggests that Weihai Baihe Biology Technological Co., Ltd.'s (SHSE:603102) recent earnings didn't contain any surprises. We think that investors are worried about some weaknesses underlying the earnings.

The Impact Of Unusual Items On Profit

For anyone who wants to understand Weihai Baihe Biology Technological's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥13m worth of unusual items. 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 analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. If Weihai Baihe Biology Technological 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 Weihai Baihe Biology Technological.

Our Take On Weihai Baihe Biology Technological's Profit Performance

We'd posit that Weihai Baihe Biology Technological's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Weihai Baihe Biology Technological's true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased in the last year. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. You'd be interested to know, that we found 1 warning sign for Weihai Baihe Biology Technological and you'll want to know about it.

Today we've zoomed in on a single data point to better understand the nature of Weihai Baihe Biology Technological's profit. But there are plenty of other ways to inform your opinion of a company. 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.