Shareholders Can Be Confident That Zhejiang Starry PharmaceuticalLtd's (SHSE:603520) Earnings Are High Quality

Zhejiang Starry Pharmaceutical Co.,Ltd. (SHSE:603520) just reported healthy earnings but the stock price didn't move much. We think that investors have missed some encouraging factors underlying the profit figures.

Check out our latest analysis for Zhejiang Starry PharmaceuticalLtd

How Do Unusual Items Influence Profit?

For anyone who wants to understand Zhejiang Starry PharmaceuticalLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥44m due to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Zhejiang Starry PharmaceuticalLtd to produce a higher profit next year, all else being equal.

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 Zhejiang Starry PharmaceuticalLtd's Profit Performance

Unusual items (expenses) detracted from Zhejiang Starry PharmaceuticalLtd's earnings over the last year, but we might see an improvement next year. Because of this, we think Zhejiang Starry PharmaceuticalLtd's earnings potential is at least as good as it seems, and maybe even better! And it's also positive that the company showed enough improvement to book a profit this year, after losing money last year. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. So while earnings quality is important, it's equally important to consider the risks facing Zhejiang Starry PharmaceuticalLtd at this point in time. For example, we've found that Zhejiang Starry PharmaceuticalLtd has 3 warning signs (2 are a bit concerning!) that deserve your attention before going any further with your analysis.

This note has only looked at a single factor that sheds light on the nature of Zhejiang Starry PharmaceuticalLtd'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

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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.