We Think That There Are More Issues For Shanghai Universal BiotechLtd (SZSE:301166) Than Just Sluggish Earnings

Investors were disappointed by Shanghai Universal Biotech Co.,Ltd.'s (SZSE:301166 ) latest earnings release. We did some further digging and think they have a few more reasons to be concerned beyond the statutory profit.

View 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¥19m 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. 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. 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 September 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. For this reason, we think that Shanghai Universal BiotechLtd's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. In further bad news, its earnings per share decreased in the last year. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. If you want to do dive deeper into Shanghai Universal BiotechLtd, you'd also look into what risks it is currently facing. When we did our research, we found 4 warning signs for Shanghai Universal BiotechLtd (2 can't be ignored!) that we believe deserve your full attention.

This note has only looked at a single factor that sheds light on the nature of Shanghai Universal BiotechLtd'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. 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 with significant insider holdings 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.