Why Heilongjiang ZBD Pharmaceutical's (SHSE:603567) Earnings Are Better Than They Seem

Heilongjiang ZBD Pharmaceutical Co., Ltd.'s (SHSE:603567) solid earnings announcement recently didn't do much to the stock price. We did some digging, and we think that investors are missing some encouraging factors in the underlying numbers.

Check out our latest analysis for Heilongjiang ZBD Pharmaceutical

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Heilongjiang ZBD Pharmaceutical's profit was reduced by CN¥38m, due to unusual items, over the last year. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. 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. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. While conducting our analysis, we found that Heilongjiang ZBD Pharmaceutical 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 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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.