There may be reason to be hopeful about Shandong Situ Biotechnology's (SZSE:300583) disappointing earnings.

Shandong Cito Biotechnology Co., Ltd. (SZSE:300583) The recent weak profit numbers don't seem to be worrying shareholders, as the share price has shown strength. We think investors are looking at some positive factors beyond the profit numbers.

See our latest analysis for Shandong Cito Biotechnology.

Impact of abnormal items on profit

Importantly, our data shows that Shandong Cito Biotechnology's profit decreased by CA$15m last year due to unusual items. It's never good to see a rare item hurt a company's profits, but on the positive side, things may improve sooner or later. Our analysis of the vast majority of publicly traded companies around the world shows that significant abnormal items often do not repeat. This is not surprising since these line items are considered rare. Therefore, assuming these abnormal costs do not occur again, we expect Shandong Shito Biotechnology to generate higher profits next year, all else being equal.

With that in mind, you might wonder what analysts are predicting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our view on Shandong Cito Biotechnology's profit performance

Last year, abnormal items (expenses) hurt Shandong Shito Biotechnology's profits, but there may be an improvement next year. Based on this observation, we think Shandong Sito Bio-technology's statutory profit is likely to actually understate its earnings potential. Unfortunately, however, earnings per share were actually lower than last year. The purpose of this article was to assess how well we can rely on statutory earnings to reflect a company's potential, but there's plenty more to consider. With this in mind, you should not consider investing in stocks unless you fully understand the risks. In terms of investment risk, We've identified 1 warning sign Considering and understanding a partnership with Shandong Sito Bio-technology should be part of your investment process.

Today, we focused on a single data point to deeper understand the nature of Shandong Cito Biotechnology's profits. But there are many other ways to communicate your opinion about a company. For example, many people consider a high return on equity to be a sign of good economic conditions, while others like to 'follow the money' and look for stocks that insiders are buying.So you might want to see this free A collection of companies with a high return on equity, or a list of stocks that insiders are buying.

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This article by Simply Wall St is general in nature. We provide commentary using only unbiased methodologies, based on historical data and analyst forecasts, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.