Why Chin Hin Group Berhad's (KLSE:CHINHIN) Shaky Earnings Are Just The Beginning Of Its Problems

A lackluster earnings announcement from Chin Hin Group Berhad (KLSE:CHINHIN) last week didn't sink the stock price. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

Our free stock report includes 3 warning signs investors should be aware of before investing in Chin Hin Group Berhad. Read for free now.

The Impact Of Unusual Items On Profit

To properly understand Chin Hin Group Berhad's profit results, we need to consider the RM65m gain attributed to unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. Which is hardly surprising, given the name. We can see that Chin Hin Group Berhad's positive unusual items were quite significant relative to its profit in the year to December 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Chin Hin Group Berhad.

Our Take On Chin Hin Group Berhad's Profit Performance

As previously mentioned, Chin Hin Group Berhad's large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. As a result, we think it may well be the case that Chin Hin Group Berhad's underlying earnings power is lower than its statutory profit. But the good news is that its EPS growth over the last three years has been very impressive. 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'd like to know more about Chin Hin Group Berhad as a business, it's important to be aware of any risks it's facing. For example, Chin Hin Group Berhad has 3 warning signs (and 1 which can't be ignored) we think you should know about.

Today we've zoomed in on a single data point to better understand the nature of Chin Hin Group Berhad's 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 with high insider ownership.

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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.