Beijing Bashi Media's (SHSE:600386) Shareholders Have More To Worry About Than Only Soft Earnings

A lackluster earnings announcement from Beijing Bashi Media Co., Ltd. (SHSE:600386) last week didn't sink the stock price. However, we believe that investors should be aware of some underlying factors which may be of concern.

Check out our latest analysis for Beijing Bashi Media

How Do Unusual Items Influence Profit?

For anyone who wants to understand Beijing Bashi Media's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥10.0m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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 items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Beijing Bashi Media.

Our Take On Beijing Bashi Media's Profit Performance

Arguably, Beijing Bashi Media's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Beijing Bashi Media's true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased in the last year. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Every company has risks, and we've spotted 3 warning signs for Beijing Bashi Media (of which 1 is potentially serious!) you should know about.

Today we've zoomed in on a single data point to better understand the nature of Beijing Bashi Media'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. 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.