The market seemed underwhelmed by last week's earnings announcement from Beijing Gas Blue Sky Holdings Limited (HKG:6828) despite the healthy numbers. We did some digging, and we think that investors are missing some encouraging factors in the underlying numbers.
We've discovered 3 warning signs about Beijing Gas Blue Sky Holdings. View them for free.
The Impact Of Unusual Items On Profit
To properly understand Beijing Gas Blue Sky Holdings' profit results, we need to consider the HK$30m expense attributed to unusual items. 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, after all, that's exactly what the accounting terminology implies. If Beijing Gas Blue Sky Holdings 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 Gas Blue Sky Holdings.
Our Take On Beijing Gas Blue Sky Holdings' Profit Performance
Because unusual items detracted from Beijing Gas Blue Sky Holdings' earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Beijing Gas Blue Sky Holdings' statutory profit actually understates its earnings potential! 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. For example, we've found that Beijing Gas Blue Sky Holdings has 3 warning signs (1 shouldn't be ignored!) that deserve your attention before going any further with your analysis.
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. 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.