We Think That There Are Issues Underlying ZYNP's (SZSE:002448) Earnings

Despite posting some strong earnings, the market for ZYNP Corporation's (SZSE:002448) stock hasn't moved much. Our analysis suggests that shareholders have noticed something concerning in the numbers.

View our latest analysis for ZYNP

How Do Unusual Items Influence Profit?

For anyone who wants to understand ZYNP's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥50m 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. Which is hardly surprising, given the name. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of ZYNP.

Our Take On ZYNP's Profit Performance

We'd posit that ZYNP'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 ZYNP's statutory profits are better than its underlying earnings power. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. 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. While earnings are important, another area to consider is the balance sheet. We've done some analysis and you can see our take on ZYNP's balance sheet by clicking here.

Today we've zoomed in on a single data point to better understand the nature of ZYNP'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. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying to be useful.

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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.