Beijing Gas Blue Sky Holdings' (HKG:6828) Solid Profits Have Weak Fundamentals

Despite posting some strong earnings, the market for Beijing Gas Blue Sky Holdings Limited's (HKG:6828) stock hasn't moved much. We did some digging, and we found some concerning factors in the details.

Check out our latest analysis for Beijing Gas Blue Sky Holdings

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Beijing Gas Blue Sky Holdings' profit received a boost of HK$40m in unusual items, over the last year. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. 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'. 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 Gas Blue Sky Holdings.

Our Take On Beijing Gas Blue Sky Holdings' Profit Performance

Arguably, Beijing Gas Blue Sky Holdings' statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Beijing Gas Blue Sky Holdings' true underlying earnings power is actually less than its statutory profit. The silver lining is that its EPS growth over the last year has been really wonderful, even if it's not a perfect measure. 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. If you want to do dive deeper into Beijing Gas Blue Sky Holdings, you'd also look into what risks it is currently facing. To help with this, we've discovered 3 warning signs (1 is a bit unpleasant!) that you ought to be aware of before buying any shares in Beijing Gas Blue Sky Holdings.

Today we've zoomed in on a single data point to better understand the nature of Beijing Gas Blue Sky Holdings' 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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

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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.