Beijing Beida Jade Bird Universal Sci-Tech's (HKG:8095) Strong Earnings Are Of Good Quality

Even though Beijing Beida Jade Bird Universal Sci-Tech Company Limited (HKG:8095 ) posted strong earnings, investors appeared to be underwhelmed. We did some digging and actually think they are being unnecessarily pessimistic.

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How Do Unusual Items Influence Profit?

For anyone who wants to understand Beijing Beida Jade Bird Universal Sci-Tech's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥38m 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 Beijing Beida Jade Bird Universal Sci-Tech doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Beijing Beida Jade Bird Universal Sci-Tech.

Our Take On Beijing Beida Jade Bird Universal Sci-Tech's Profit Performance

Unusual items (expenses) detracted from Beijing Beida Jade Bird Universal Sci-Tech's earnings over the last year, but we might see an improvement next year. Because of this, we think Beijing Beida Jade Bird Universal Sci-Tech's earnings potential is at least as good as it seems, and maybe even better! And it's also positive that the company showed enough improvement to book a profit this year, after losing money 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. At Simply Wall St, we found 1 warning sign for Beijing Beida Jade Bird Universal Sci-Tech and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of Beijing Beida Jade Bird Universal Sci-Tech'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 with significant insider holdings 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.