Sirio Pharma Co., Ltd. (SZSE:300791) just reported healthy earnings but the stock price didn't move much. We think that investors have missed some encouraging factors underlying the profit figures.

The Impact Of Unusual Items On Profit

For anyone who wants to understand Sirio Pharma's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥56m 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, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Sirio Pharma 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 Sirio Pharma's Profit Performance

Unusual items (expenses) detracted from Sirio Pharma's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Sirio Pharma's statutory profit actually understates its earnings potential! And the EPS is up 19% annually, over the last three years. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. If you'd like to know more about Sirio Pharma as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 1 warning sign for Sirio Pharma you should know about.

This note has only looked at a single factor that sheds light on the nature of Sirio Pharma'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 that insiders are buying 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.