Earnings Troubles May Signal Larger Issues for Yunnan Botanee Bio-Technology GroupLTD (SZSE:300957) Shareholders

A lackluster earnings announcement from Yunnan Botanee Bio-Technology Group Co.LTD (SZSE:300957) last week didn't sink the stock price. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

See our latest analysis for Yunnan Botanee Bio-Technology GroupLTD

How Do Unusual Items Influence Profit?

To properly understand Yunnan Botanee Bio-Technology GroupLTD's profit results, we need to consider the CN¥186m gain attributed to unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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'. Yunnan Botanee Bio-Technology GroupLTD had a rather significant contribution from unusual items relative to its profit to September 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

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 Yunnan Botanee Bio-Technology GroupLTD's Profit Performance

As previously mentioned, Yunnan Botanee Bio-Technology GroupLTD's large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. As a result, we think it may well be the case that Yunnan Botanee Bio-Technology GroupLTD's underlying earnings power is lower than its statutory profit. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Case in point: We've spotted 4 warning signs for Yunnan Botanee Bio-Technology GroupLTD you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Yunnan Botanee Bio-Technology GroupLTD'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 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.