YiChang HEC ChangJiang Pharmaceutical Co., Ltd.'s (HKG:1558) strong earnings report was rewarded with a positive stock price move. Our analysis found some more factors that we think are good for shareholders.

How Do Unusual Items Influence Profit?

For anyone who wants to understand YiChang HEC ChangJiang Pharmaceutical's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥482m 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. 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 YiChang HEC ChangJiang Pharmaceutical doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

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 YiChang HEC ChangJiang Pharmaceutical's Profit Performance

Because unusual items detracted from YiChang HEC ChangJiang Pharmaceutical's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that YiChang HEC ChangJiang Pharmaceutical's statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at an extremely impressive rate over 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. You'd be interested to know, that we found 1 warning sign for YiChang HEC ChangJiang Pharmaceutical and you'll want to know about this.

Today we've zoomed in on a single data point to better understand the nature of YiChang HEC ChangJiang Pharmaceutical's 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. 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.