There May Be Reason For Hope In Zhuhai Rundu Pharmaceutical's (SZSE:002923) Disappointing Earnings

Zhuhai Rundu Pharmaceutical Co., Ltd.'s (SZSE:002923) recent soft profit numbers didn't appear to worry shareholders, as the stock price showed strength. However, we think the company is showing some signs that things are more promising than they seem.

View our latest analysis for Zhuhai Rundu Pharmaceutical

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Zhuhai Rundu Pharmaceutical's profit was reduced by CN¥41m, due to unusual items, over the last year. 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, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Zhuhai Rundu Pharmaceutical to produce a higher profit next year, all else being equal.

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

Our Take On Zhuhai Rundu Pharmaceutical's Profit Performance

Because unusual items detracted from Zhuhai Rundu Pharmaceutical's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Zhuhai Rundu Pharmaceutical's statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back over the last year. 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 want to do dive deeper into Zhuhai Rundu Pharmaceutical, you'd also look into what risks it is currently facing. When we did our research, we found 4 warning signs for Zhuhai Rundu Pharmaceutical (1 is potentially serious!) that we believe deserve your full attention.

This note has only looked at a single factor that sheds light on the nature of Zhuhai Rundu 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.