The most recent earnings report from Shanghai Shenqi Pharmaceutical Investment Management Co., Ltd. (SHSE:600613) was disappointing for shareholders. While the headline numbers were soft, we believe that investors might be missing some encouraging factors.

The Impact Of Unusual Items On Profit

For anyone who wants to understand Shanghai Shenqi Pharmaceutical Investment Management's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥48m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. If Shanghai Shenqi Pharmaceutical Investment Management doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Shanghai Shenqi Pharmaceutical Investment Management.

Our Take On Shanghai Shenqi Pharmaceutical Investment Management's Profit Performance

Because unusual items detracted from Shanghai Shenqi Pharmaceutical Investment Management's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Shanghai Shenqi Pharmaceutical Investment Management's earnings potential is at least as good as it seems, and maybe even better! On the other hand, its EPS actually shrunk in the last twelve months. 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. If you want to do dive deeper into Shanghai Shenqi Pharmaceutical Investment Management, you'd also look into what risks it is currently facing. Case in point: We've spotted 2 warning signs for Shanghai Shenqi Pharmaceutical Investment Management you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Shanghai Shenqi Pharmaceutical Investment Management's profit. But there are plenty of other ways to inform your opinion of a company. 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.