Northeast Pharmaceutical Group's (SZSE:000597) Weak Earnings May Only Reveal A Part Of The Whole Picture

Northeast Pharmaceutical Group Co., Ltd.'s (SZSE:000597) recent weak earnings report didn't cause a big stock movement. However, we believe that investors should be aware of some underlying factors which may be of concern.

Check out our latest analysis for Northeast Pharmaceutical Group

The Impact Of Unusual Items On Profit

For anyone who wants to understand Northeast Pharmaceutical Group's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥206m worth of unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And that's as you'd expect, given these boosts are described as 'unusual'. We can see that Northeast Pharmaceutical Group's positive unusual items were quite significant relative to its profit in the year to September 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

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

As previously mentioned, Northeast Pharmaceutical Group's large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. As a result, we think it may well be the case that Northeast Pharmaceutical Group's underlying earnings power is lower than its statutory profit. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. 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'd like to know more about Northeast Pharmaceutical Group as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 2 warning signs for Northeast Pharmaceutical Group you should know about.

This note has only looked at a single factor that sheds light on 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. 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.