Weak Statutory Earnings May Not Tell The Whole Story For Guiyang Xintian PharmaceuticalLtd (SZSE:002873)

The market wasn't impressed with the soft earnings from Guiyang Xintian Pharmaceutical Co.,Ltd. (SZSE:002873) recently. We did some further digging and think they have a few more reasons to be concerned beyond the statutory profit.

See our latest analysis for Guiyang Xintian PharmaceuticalLtd

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Guiyang Xintian PharmaceuticalLtd's profit received a boost of CN¥6.7m in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. If Guiyang Xintian PharmaceuticalLtd doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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 Guiyang Xintian PharmaceuticalLtd's Profit Performance

Arguably, Guiyang Xintian PharmaceuticalLtd's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Guiyang Xintian PharmaceuticalLtd'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 6.1% over the last three years. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, Guiyang Xintian PharmaceuticalLtd has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

This note has only looked at a single factor that sheds light on the nature of Guiyang Xintian PharmaceuticalLtd'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. 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 that insiders are buying 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.