We Think You Should Be Aware Of Some Concerning Factors In China Resources Sanjiu Medical & Pharmaceutical's (SZSE:000999) Earnings

China Resources Sanjiu Medical & Pharmaceutical Co., Ltd.'s (SZSE:000999) healthy profit numbers didn't contain any surprises for investors. However the statutory profit number doesn't tell the whole story, and we have found some factors which might be of concern to shareholders.

Check out our latest analysis for China Resources Sanjiu Medical & Pharmaceutical

The Impact Of Unusual Items On Profit

For anyone who wants to understand China Resources Sanjiu Medical & Pharmaceutical's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥359m worth of unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. Which is hardly surprising, given the name. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

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 China Resources Sanjiu Medical & Pharmaceutical's Profit Performance

Arguably, China Resources Sanjiu Medical & Pharmaceutical's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that China Resources Sanjiu Medical & Pharmaceutical's true underlying earnings power is actually less than its statutory profit. Nonetheless, it's still worth noting that its earnings per share have grown at 63% over the last three years. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. So while earnings quality is important, it's equally important to consider the risks facing China Resources Sanjiu Medical & Pharmaceutical at this point in time. For example - China Resources Sanjiu Medical & Pharmaceutical has 1 warning sign we think you should be aware of.

This note has only looked at a single factor that sheds light on the nature of China Resources Sanjiu Medical & Pharmaceutical'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. 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 with significant insider holdings to be useful.

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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.