Investors Can Find Comfort In Shanghai Rightongene Biotechnology's (SHSE:688217) Earnings Quality

The market for Shanghai Rightongene Biotechnology Co., Ltd.'s (SHSE:688217) shares didn't move much after it posted weak earnings recently. We think that the softer headline numbers might be getting counterbalanced by some positive underlying factors.

Check out our latest analysis for Shanghai Rightongene Biotechnology

How Do Unusual Items Influence Profit?

For anyone who wants to understand Shanghai Rightongene Biotechnology's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥5.2m due to unusual items. 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, after all, that's exactly what the accounting terminology implies. Shanghai Rightongene Biotechnology took a rather significant hit from unusual items in the year to December 2023. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

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 Shanghai Rightongene Biotechnology's Profit Performance

As we mentioned previously, the Shanghai Rightongene Biotechnology's profit was hampered by unusual items in the last year. Because of this, we think Shanghai Rightongene Biotechnology's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! On the other hand, its EPS actually shrunk in the last twelve months. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. To that end, you should learn about the 3 warning signs we've spotted with Shanghai Rightongene Biotechnology (including 1 which is significant).

Today we've zoomed in on a single data point to better understand the nature of Shanghai Rightongene Biotechnology'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.