Jin Yang Pharmaceutical's (KOSDAQ:007370) Problems Go Beyond Weak Profit

The subdued market reaction suggests that Jin Yang Pharmaceutical Co., Ltd.'s (KOSDAQ:007370) recent earnings didn't contain any surprises. We think that investors are worried about some weaknesses underlying the earnings.

View our latest analysis for Jin Yang Pharmaceutical

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Jin Yang Pharmaceutical's profit received a boost of ₩2.5b in unusual items, over the last year. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And, after all, that's exactly what the accounting terminology implies. We can see that Jin Yang Pharmaceutical'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 Jin Yang Pharmaceutical.

Our Take On Jin Yang Pharmaceutical's Profit Performance

As previously mentioned, Jin Yang 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 Jin Yang Pharmaceutical's underlying earnings power is lower than its statutory profit. But at least holders can take some solace from the 67% per annum growth in EPS for the last three. 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. If you want to do dive deeper into Jin Yang Pharmaceutical, you'd also look into what risks it is currently facing. While conducting our analysis, we found that Jin Yang Pharmaceutical has 3 warning signs and it would be unwise to ignore them.

This note has only looked at a single factor that sheds light on the nature of Jin Yang 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 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.