Beijing Beida Jade Bird Universal Sci-Tech's (HKG:8095) Weak Earnings May Only Reveal A Part Of The Whole Picture

Beijing Beida Jade Bird Universal Sci-Tech Company Limited's (HKG:8095) recent weak earnings report didn't cause a big stock movement. We think that investors are worried about some weaknesses underlying the earnings.

See our latest analysis for Beijing Beida Jade Bird Universal Sci-Tech

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Beijing Beida Jade Bird Universal Sci-Tech's profit received a boost of CN¥326m in unusual items, over the last year. 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. And that's as you'd expect, given these boosts are described as 'unusual'. We can see that Beijing Beida Jade Bird Universal Sci-Tech's positive unusual items were quite significant relative to its profit in the year to December 2023. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

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

As we discussed above, we think the significant positive unusual item makes Beijing Beida Jade Bird Universal Sci-Tech's earnings a poor guide to its underlying profitability. For this reason, we think that Beijing Beida Jade Bird Universal Sci-Tech's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. But the good news is that its EPS growth over the last three years has been very impressive. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. While conducting our analysis, we found that Beijing Beida Jade Bird Universal Sci-Tech has 3 warning signs and it would be unwise to ignore these.

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 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.