Why Jiangsu Yuyue Medical Equipment & Supply's (SZSE:002223) Shaky Earnings Are Just The Beginning Of Its Problems

A lackluster earnings announcement from Jiangsu Yuyue Medical Equipment & Supply Co., Ltd. (SZSE:002223) last week didn't sink the stock price. However, we believe that investors should be aware of some underlying factors which may be of concern.

View our latest analysis for Jiangsu Yuyue Medical Equipment & Supply

How Do Unusual Items Influence Profit?

To properly understand Jiangsu Yuyue Medical Equipment & Supply's profit results, we need to consider the CN¥269m gain attributed to 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. 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).

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On Jiangsu Yuyue Medical Equipment & Supply's Profit Performance

Arguably, Jiangsu Yuyue Medical Equipment & Supply's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Jiangsu Yuyue Medical Equipment & Supply's statutory profits are better than its underlying earnings power. Nonetheless, it's still worth noting that its earnings per share have grown at 8.7% over the last three years. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For example - Jiangsu Yuyue Medical Equipment & Supply has 1 warning sign we think you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Jiangsu Yuyue Medical Equipment & Supply'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.