Beijing Enterprises Holdings' (HKG:392) Anemic Earnings Might Be Worse Than You Think

The subdued market reaction suggests that Beijing Enterprises Holdings Limited's (HKG:392) recent earnings didn't contain any surprises. We think that investors are worried about some weaknesses underlying the earnings.

See our latest analysis for Beijing Enterprises Holdings

The Impact Of Unusual Items On Profit

For anyone who wants to understand Beijing Enterprises Holdings' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from CN¥584m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And, after all, that's exactly what the accounting terminology implies. Beijing Enterprises Holdings had a rather significant contribution from unusual items relative to its profit 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.

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 Beijing Enterprises Holdings' Profit Performance

As previously mentioned, Beijing Enterprises Holdings' large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. As a result, we think it may well be the case that Beijing Enterprises Holdings' underlying earnings power is lower than its statutory profit. But at least holders can take some solace from the 24% per annum growth in EPS for the last three. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. If you'd like to know more about Beijing Enterprises Holdings as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 2 warning signs for Beijing Enterprises Holdings you should be mindful of and 1 of these is significant.

This note has only looked at a single factor that sheds light on the nature of Beijing Enterprises Holdings' profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.