We Like The Quality Of Dezhan Healthcare's (SZSE:000813) Earnings

The market seemed underwhelmed by last week's earnings announcement from Dezhan Healthcare Company Limited (SZSE:000813) despite the healthy numbers. Our analysis suggests that shareholders might be missing some positive underlying factors in the earnings report.

View our latest analysis for Dezhan Healthcare

The Impact Of Unusual Items On Profit

For anyone who wants to understand Dezhan Healthcare's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥22m 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 that's hardly a surprise given these line items are considered unusual. Dezhan Healthcare took a rather significant hit from unusual items in the year to December 2023. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Dezhan Healthcare.

Our Take On Dezhan Healthcare's Profit Performance

As we discussed above, we think the significant unusual expense will make Dezhan Healthcare's statutory profit lower than it would otherwise have been. Because of this, we think Dezhan Healthcare's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! And one can definitely find a positive in the fact that it made a profit this year, despite losing money last year. 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. If you want to do dive deeper into Dezhan Healthcare, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 2 warning signs for Dezhan Healthcare (of which 1 is a bit unpleasant!) you should know about.

Today we've zoomed in on a single data point to better understand the nature of Dezhan Healthcare's profit. But there are plenty of other ways to inform your opinion of a company. 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.