Northeast Pharmaceutical Group (SZSE:000597) Is Posting Promising Earnings But The Good News Doesn’t Stop There

Northeast Pharmaceutical Group Co., Ltd.'s (SZSE:000597) solid earnings announcement recently didn't do much to the stock price. Our analysis suggests that shareholders might be missing some positive underlying factors in the earnings report.

Check out our latest analysis for Northeast Pharmaceutical Group

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Northeast Pharmaceutical Group's profit was reduced by CN¥193m, due to unusual items, over the last year. 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 Northeast Pharmaceutical Group 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 Northeast Pharmaceutical Group.

Our Take On Northeast Pharmaceutical Group's Profit Performance

Unusual items (expenses) detracted from Northeast Pharmaceutical Group's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Northeast Pharmaceutical Group's statutory profit actually understates its earnings potential! Better yet, its EPS are growing strongly, which is nice to see. 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. If you want to do dive deeper into Northeast Pharmaceutical Group, you'd also look into what risks it is currently facing. For example - Northeast Pharmaceutical Group has 2 warning signs we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Northeast Pharmaceutical Group's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. 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.

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.