Should You Use China Pioneer Pharma Holdings' (HKG:1345) Statutory Earnings To Analyse It?

As a general rule, we think profitable companies are less risky than companies that lose money. That said, the current statutory profit is not always a good guide to a company's underlying profitability. This article will consider whether China Pioneer Pharma Holdings' (HKG:1345) statutory profits are a good guide to its underlying earnings.

It's good to see that over the last twelve months China Pioneer Pharma Holdings made a profit of CN¥36.7m on revenue of CN¥1.32b. Below, you can see that both its revenue and its profit have fallen over the last three years.

Check out our latest analysis for China Pioneer Pharma Holdings

Of course, when it comes to statutory profit, the devil is often in the detail, and we can get a better sense for a company by diving deeper into the financial statements. This article will focus on the impact unusual items have had on China Pioneer Pharma Holdings' statutory earnings. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of China Pioneer Pharma Holdings.

The Impact Of Unusual Items On Profit

For anyone who wants to understand China Pioneer Pharma Holdings' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥13m due to unusual items. 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 that's hardly a surprise given these line items are considered unusual. If China Pioneer Pharma Holdings doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Our Take On China Pioneer Pharma Holdings' Profit Performance

Unusual items (expenses) detracted from China Pioneer Pharma Holdings' earnings over the last year, but we might see an improvement next year. Because of this, we think China Pioneer Pharma Holdings' earnings potential is at least as good as it seems, and maybe even better! On the other hand, its EPS actually shrunk in 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 China Pioneer Pharma Holdings as a business, it's important to be aware of any risks it's facing. To help with this, we've discovered 4 warning signs (1 doesn't sit too well with us!) that you ought to be aware of before buying any shares in China Pioneer Pharma Holdings.

Today we've zoomed in on a single data point to better understand the nature of China Pioneer Pharma Holdings' 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. 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. 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.
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