Why Zhejiang Garden BiopharmaceuticalLtd's (SZSE:300401) Shaky Earnings Are Just The Beginning Of Its Problems

Despite Zhejiang Garden Biopharmaceutical Co.,Ltd.'s (SZSE:300401) recent earnings report having lackluster headline numbers, the market responded positively. Sometimes, shareholders are willing to ignore soft numbers with the hope that they will improve, but our analysis suggests this is unlikely for Zhejiang Garden BiopharmaceuticalLtd.

See our latest analysis for Zhejiang Garden BiopharmaceuticalLtd

The Impact Of Unusual Items On Profit

For anyone who wants to understand Zhejiang Garden BiopharmaceuticalLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥89m 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 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. We can see that Zhejiang Garden BiopharmaceuticalLtd's positive unusual items were quite significant relative to its profit in the year to March 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger 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 Zhejiang Garden BiopharmaceuticalLtd.

Our Take On Zhejiang Garden BiopharmaceuticalLtd's Profit Performance

As previously mentioned, Zhejiang Garden BiopharmaceuticalLtd's large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. As a result, we think it may well be the case that Zhejiang Garden BiopharmaceuticalLtd's underlying earnings power is lower than its statutory profit. Sadly, its EPS was down over the last twelve months. 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. If you'd like to know more about Zhejiang Garden BiopharmaceuticalLtd as a business, it's important to be aware of any risks it's facing. To help with this, we've discovered 2 warning signs (1 is a bit unpleasant!) that you ought to be aware of before buying any shares in Zhejiang Garden BiopharmaceuticalLtd.

Today we've zoomed in on a single data point to better understand the nature of Zhejiang Garden BiopharmaceuticalLtd'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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.