Guangdong Lifestrong Pharmacy's (SZSE:301111) Anemic Earnings Might Be Worse Than You Think

Investors were disappointed by Guangdong Lifestrong Pharmacy Co., Ltd.'s (SZSE:301111 ) latest earnings release. Our analysis has found some reasons to be concerned, beyond the weak headline numbers.

View our latest analysis for Guangdong Lifestrong Pharmacy

The Impact Of Unusual Items On Profit

For anyone who wants to understand Guangdong Lifestrong Pharmacy's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥4.4m 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 crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. Which is hardly surprising, given the name. Guangdong Lifestrong Pharmacy had a rather significant contribution from unusual items relative to its profit to September 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 Guangdong Lifestrong Pharmacy.

Our Take On Guangdong Lifestrong Pharmacy's Profit Performance

As we discussed above, we think the significant positive unusual item makes Guangdong Lifestrong Pharmacy's earnings a poor guide to its underlying profitability. For this reason, we think that Guangdong Lifestrong Pharmacy's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. In further bad news, its earnings per share decreased in the last year. 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. For example, Guangdong Lifestrong Pharmacy has 4 warning signs (and 2 which don't sit too well with us) we think you should know about.

Today we've zoomed in on a single data point to better understand the nature of Guangdong Lifestrong Pharmacy'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 with significant insider holdings 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.