The market for Jiangsu Yuyue Medical Equipment & Supply Co., Ltd.'s (SZSE:002223) stock was strong after it released a healthy earnings report last week. However, we think that shareholders should be cautious as we found some worrying factors underlying the profit.

How Do Unusual Items Influence Profit?

To properly understand Jiangsu Yuyue Medical Equipment & Supply's profit results, we need to consider the CN¥530m gain attributed to unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. Jiangsu Yuyue Medical Equipment & Supply had a rather significant contribution from unusual items relative to its profit 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.

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 Jiangsu Yuyue Medical Equipment & Supply's Profit Performance

As we discussed above, we think the significant positive unusual item makes Jiangsu Yuyue Medical Equipment & Supply's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Jiangsu Yuyue Medical Equipment & Supply's underlying earnings power is lower than its statutory profit. But at least holders can take some solace from the 29% per annum growth in EPS for the last three. 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. So while earnings quality is important, it's equally important to consider the risks facing Jiangsu Yuyue Medical Equipment & Supply at this point in time. Case in point: We've spotted 2 warning signs for Jiangsu Yuyue Medical Equipment & Supply you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Jiangsu Yuyue Medical Equipment & Supply's 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. 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.