We're Not Counting On TBK & Sons Holdings (HKG:1960) To Sustain Its Statutory Profitability

Broadly speaking, profitable businesses are less risky than unprofitable ones. However, sometimes companies receive a one-off boost (or reduction) to their profit, and it's not always clear whether statutory profits are a good guide, going forward. This article will consider whether TBK & Sons Holdings' (HKG:1960) statutory profits are a good guide to its underlying earnings.

It's good to see that over the last twelve months TBK & Sons Holdings made a profit of RM12.1m on revenue of RM151.1m. The chart below shows how it has grown revenue over the last three years, but that profit has declined.

Check out our latest analysis for TBK & Sons Holdings

Importantly, statutory profits are not always the best tool for understanding a company's true earnings power, so it's well worth examining profits in a little more detail. This article will focus on the impact unusual items have had on TBK & Sons Holdings' statutory earnings. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of TBK & Sons Holdings.

The Impact Of Unusual Items On Profit

For anyone who wants to understand TBK & Sons Holdings' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from RM4.4m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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. 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).

Our Take On TBK & Sons Holdings' Profit Performance

Arguably, TBK & Sons Holdings' statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that TBK & Sons Holdings' statutory profits are better than its underlying earnings power. Sadly, its EPS was down over the last twelve months. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. If you want to do dive deeper into TBK & Sons Holdings, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 2 warning signs for TBK & Sons Holdings and you'll want to know about them.

This note has only looked at a single factor that sheds light on the nature of TBK & Sons Holdings' profit. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. 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.

When trading TBK & Sons Holdings or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.