Ingenieur Gudang Berhad's (KLSE:INGENIEU) Solid Earnings May Rest On Weak Foundations

Ingenieur Gudang Berhad's (KLSE:INGENIEU) healthy profit numbers didn't contain any surprises for investors. We think this is due to investors looking beyond the statutory profits and being concerned with what they see.

The Impact Of Unusual Items On Profit

For anyone who wants to understand Ingenieur Gudang Berhad's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from RM14m worth of 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 analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. We can see that Ingenieur Gudang Berhad's positive unusual items were quite significant relative to its profit in the year to November 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

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

Our Take On Ingenieur Gudang Berhad's Profit Performance

As we discussed above, we think the significant positive unusual item makes Ingenieur Gudang Berhad's earnings a poor guide to its underlying profitability. For this reason, we think that Ingenieur Gudang Berhad's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. But at least holders can take some solace from the 15% EPS growth in the last year. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, we've found that Ingenieur Gudang Berhad has 4 warning signs (1 doesn't sit too well with us!) that deserve your attention before going any further with your analysis.

This note has only looked at a single factor that sheds light on the nature of Ingenieur Gudang 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.