We Think That There Are More Issues For Hangzhou Minsheng Healthcare (SZSE:301507) Than Just Sluggish Earnings

The market rallied behind Hangzhou Minsheng Healthcare Co., Ltd.'s (SZSE:301507) stock, leading do a rise in the share price after its recent weak earnings report. We think that shareholders might be missing some concerning factors that our analysis found.

View our latest analysis for Hangzhou Minsheng Healthcare

How Do Unusual Items Influence Profit?

To properly understand Hangzhou Minsheng Healthcare's profit results, we need to consider the CN¥8.3m gain attributed to unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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'. 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 Hangzhou Minsheng Healthcare.

Our Take On Hangzhou Minsheng Healthcare's Profit Performance

We'd posit that Hangzhou Minsheng Healthcare's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Hangzhou Minsheng Healthcare's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 24% per annum growth in EPS for the last three. 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. So while earnings quality is important, it's equally important to consider the risks facing Hangzhou Minsheng Healthcare at this point in time. For example - Hangzhou Minsheng Healthcare 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 Hangzhou Minsheng Healthcare'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.