We Like The Quality Of Heilongjiang ZBD Pharmaceutical's (SHSE:603567) Earnings

Heilongjiang ZBD Pharmaceutical Co., Ltd.'s (SHSE:603567) recent earnings report didn't offer any surprises, with the shares unchanged over the last week. We did some analysis to find out why and believe that investors might be missing some encouraging factors contained in the earnings.

Check out our latest analysis for Heilongjiang ZBD Pharmaceutical

The Impact Of Unusual Items On Profit

For anyone who wants to understand Heilongjiang ZBD Pharmaceutical's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥188m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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 Heilongjiang ZBD Pharmaceutical to produce a higher profit next year, all else being equal.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Heilongjiang ZBD Pharmaceutical.

Our Take On Heilongjiang ZBD Pharmaceutical's Profit Performance

Unusual items (expenses) detracted from Heilongjiang ZBD Pharmaceutical's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Heilongjiang ZBD Pharmaceutical's statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at an extremely impressive rate over the last year. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. You'd be interested to know, that we found 2 warning signs for Heilongjiang ZBD Pharmaceutical and you'll want to know about these.

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