Jilin Jian Yisheng Pharmaceutical's (SZSE:002566) Earnings Are Weaker Than They Seem

Jilin Jian Yisheng Pharmaceutical Co., Ltd.'s (SZSE:002566) stock was strong after they recently reported robust earnings. However, we think that shareholders may be missing some concerning details in the numbers.

See our latest analysis for Jilin Jian Yisheng Pharmaceutical

How Do Unusual Items Influence Profit?

For anyone who wants to understand Jilin Jian Yisheng Pharmaceutical's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥21m 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. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. 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).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Jilin Jian Yisheng Pharmaceutical.

Our Take On Jilin Jian Yisheng Pharmaceutical's Profit Performance

We'd posit that Jilin Jian Yisheng Pharmaceutical's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Jilin Jian Yisheng Pharmaceutical's statutory profits are better than its underlying earnings power. Nonetheless, it's still worth noting that its earnings per share have grown at 18% 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Case in point: We've spotted 2 warning signs for Jilin Jian Yisheng Pharmaceutical you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Jilin Jian Yisheng 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. 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.