The Strong Earnings Posted By Bumble (NASDAQ:BMBL) Are A Good Indication Of The Strength Of The Business

By
Simply Wall St
Published
May 24, 2021
NasdaqGS:BMBL
Source: Shutterstock

Bumble Inc. (NASDAQ:BMBL) just reported healthy earnings but the stock price didn't move much. We think that investors have missed some encouraging factors underlying the profit figures.

View our latest analysis for Bumble

earnings-and-revenue-history
NasdaqGS:BMBL Earnings and Revenue History May 25th 2021

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Bumble's profit was reduced by US$123m, due to unusual items, over the last year. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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. In the twelve months to March 2021, Bumble had a big unusual items expense. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be.

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 Bumble's Profit Performance

As we discussed above, we think the significant unusual expense will make Bumble's statutory profit lower than it would otherwise have been. Based on this observation, we consider it possible that Bumble's statutory profit actually understates its earnings potential! 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. So while earnings quality is important, it's equally important to consider the risks facing Bumble at this point in time. Case in point: We've spotted 3 warning signs for Bumble you should be mindful of and 1 of these is concerning.

This note has only looked at a single factor that sheds light on the nature of Bumble's 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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