Investors were disappointed with Suzhou Highfine Biotech Co., Ltd.'s (SZSE:301393) earnings, despite the strong profit numbers. We think that the market might be paying attention to some underlying factors that they find to be concerning.
The Impact Of Unusual Items On Profit
For anyone who wants to understand Suzhou Highfine Biotech's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥8.8m 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 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. If Suzhou Highfine Biotech 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 Suzhou Highfine Biotech.
Our Take On Suzhou Highfine Biotech's Profit Performance
We'd posit that Suzhou Highfine Biotech's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Suzhou Highfine Biotech's statutory profits are better than its underlying earnings power. 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. Just as investors must consider earnings, it is also important to take into account the strength of a company's balance sheet. We've done some analysis and you can see our take on Suzhou Highfine Biotech's balance sheet by clicking here.
Today we've zoomed in on a single data point to better understand the nature of Suzhou Highfine Biotech'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. 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.
