Shanghai Universal BiotechLtd's (SZSE:301166) Sluggish Earnings Might Be Just The Beginning Of Its Problems

Shanghai Universal Biotech Co.,Ltd.'s (SZSE:301166) stock showed strength, with investors undeterred by its weak earnings report. We think that shareholders might be missing some concerning factors that our analysis found.

Check out our latest analysis for Shanghai Universal BiotechLtd

How Do Unusual Items Influence Profit?

For anyone who wants to understand Shanghai Universal BiotechLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥4.5m worth of unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And that's as you'd expect, given these boosts are described as 'unusual'. We can see that Shanghai Universal BiotechLtd's positive unusual items were quite significant relative to its profit in the year to March 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

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

Our Take On Shanghai Universal BiotechLtd's Profit Performance

As we discussed above, we think the significant positive unusual item makes Shanghai Universal BiotechLtd's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Shanghai Universal BiotechLtd's underlying earnings power is lower 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. Be aware that Shanghai Universal BiotechLtd is showing 4 warning signs in our investment analysis and 2 of those can't be ignored...

Today we've zoomed in on a single data point to better understand the nature of Shanghai Universal BiotechLtd'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. 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.