Cisen Pharmaceutical (SHSE:603367) Strong Profits May Be Masking Some Underlying Issues

Cisen Pharmaceutical Co., Ltd.'s (SHSE:603367) robust recent earnings didn't do much to move the stock. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers.

View our latest analysis for Cisen Pharmaceutical

How Do Unusual Items Influence Profit?

To properly understand Cisen Pharmaceutical's profit results, we need to consider the CN¥66m 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 analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. 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 Cisen Pharmaceutical.

Our Take On Cisen Pharmaceutical's Profit Performance

Arguably, Cisen Pharmaceutical's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Cisen Pharmaceutical's statutory profits are better than its underlying earnings power. Nonetheless, it's still worth noting that its earnings per share have grown at 33% over the last three years. 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. If you'd like to know more about Cisen Pharmaceutical as a business, it's important to be aware of any risks it's facing. You'd be interested to know, that we found 1 warning sign for Cisen Pharmaceutical and you'll want to know about it.

This note has only looked at a single factor that sheds light on the nature of Cisen Pharmaceutical's profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.