Investors Can Find Comfort In China Resources Medical Holdings' (HKG:1515) Earnings Quality

Shareholders appeared unconcerned with China Resources Medical Holdings Company Limited's (HKG:1515) lackluster earnings report last week. We did some digging, and we believe the earnings are stronger than they seem.

View our latest analysis for China Resources Medical Holdings

How Do Unusual Items Influence Profit?

For anyone who wants to understand China Resources Medical Holdings' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥39m due to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect China Resources Medical Holdings to produce a higher profit next year, all else being equal.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On China Resources Medical Holdings' Profit Performance

Unusual items (expenses) detracted from China Resources Medical Holdings' earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that China Resources Medical Holdings' statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back over the last year. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of China Resources Medical Holdings.

Today we've zoomed in on a single data point to better understand the nature of China Resources Medical Holdings' profit. But there are plenty of other ways to inform your opinion of a company. 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. 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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