Jianmin Pharmaceutical GroupLtd's (SHSE:600976) Anemic Earnings Might Be Worse Than You Think

Jianmin Pharmaceutical Group Co.,Ltd.'s (SHSE:600976) stock showed strength, with investors undeterred by its weak earnings report. While shareholders may be willing to overlook soft profit numbers, we believe that they should also be taking into account some other factors which may be cause for concern.

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How Do Unusual Items Influence Profit?

For anyone who wants to understand Jianmin Pharmaceutical GroupLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥27m 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, after all, that's exactly what the accounting terminology implies. If Jianmin Pharmaceutical GroupLtd doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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 Jianmin Pharmaceutical GroupLtd's Profit Performance

We'd posit that Jianmin Pharmaceutical GroupLtd's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Jianmin Pharmaceutical GroupLtd's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 18% per annum growth in EPS for the last three. 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'd like to know more about Jianmin Pharmaceutical GroupLtd as a business, it's important to be aware of any risks it's facing. While conducting our analysis, we found that Jianmin Pharmaceutical GroupLtd has 1 warning sign and it would be unwise to ignore it.

Today we've zoomed in on a single data point to better understand the nature of Jianmin Pharmaceutical 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.