Beijing Science Sun Pharmaceutical's (SZSE:300485) Problems Go Beyond Weak Profit

Last week's earnings announcement from Beijing Science Sun Pharmaceutical Co., Ltd. (SZSE:300485) was disappointing to investors, with a sluggish profit figure. We did some further digging and think they have a few more reasons to be concerned beyond the statutory profit.

Check out our latest analysis for Beijing Science Sun Pharmaceutical

How Do Unusual Items Influence Profit?

To properly understand Beijing Science Sun Pharmaceutical's profit results, we need to consider the CN¥101m gain attributed to 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 that's as you'd expect, given these boosts are described as 'unusual'. We can see that Beijing Science Sun Pharmaceutical's positive unusual items were quite significant relative to its profit in the year to December 2023. 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 Beijing Science Sun Pharmaceutical.

Our Take On Beijing Science Sun Pharmaceutical's Profit Performance

As previously mentioned, Beijing Science Sun Pharmaceutical'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 Beijing Science Sun Pharmaceutical's underlying earnings power is lower than its statutory profit. Sadly, its EPS was down over the last twelve months. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example - Beijing Science Sun Pharmaceutical has 1 warning sign we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Beijing Science Sun Pharmaceutical's profit. But there are plenty of other ways to inform your opinion of a company. 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.