Stock Analysis

Should You Use MBV International's (HKG:1957) Statutory Earnings To Analyse It?

SEHK:1957
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It might be old fashioned, but we really like to invest in companies that make a profit, each and every year. Having said that, sometimes statutory profit levels are not a good guide to ongoing profitability, because some short term one-off factor has impacted profit levels. This article will consider whether MBV International's (HKG:1957) statutory profits are a good guide to its underlying earnings.

It's good to see that over the last twelve months MBV International made a profit of RM6.67m on revenue of RM136.8m. Below, you can see that both its revenue and its profit have fallen over the last three years.

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earnings-and-revenue-history
SEHK:1957 Earnings and Revenue History December 18th 2020

Of course, when it comes to statutory profit, the devil is often in the detail, and we can get a better sense for a company by diving deeper into the financial statements. This article will discuss how unusual items have impacted MBV International's most recent profit results. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of MBV International.

The Impact Of Unusual Items On Profit

Importantly, our data indicates that MBV International's profit was reduced by RM8.1m, due to unusual items, over the last year. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. In the twelve months to June 2020, MBV International 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.

Our Take On MBV International's Profit Performance

As we discussed above, we think the significant unusual expense will make MBV International's statutory profit lower than it would otherwise have been. Because of this, we think MBV International's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! Unfortunately, though, its earnings per share actually fell back over the last year. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Every company has risks, and we've spotted 4 warning signs for MBV International (of which 1 is concerning!) you should know about.

Today we've zoomed in on a single data point to better understand the nature of MBV International'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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This article by Simply Wall St is general in nature. 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.
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