Kein Hing International Berhad's (KLSE:KEINHIN) Anemic Earnings Might Be Worse Than You Think

A lackluster earnings announcement from Kein Hing International Berhad (KLSE:KEINHIN) last week didn't sink the stock price. However, we believe that investors should be aware of some underlying factors which may be of concern.

See our latest analysis for Kein Hing International Berhad

The Impact Of Unusual Items On Profit

For anyone who wants to understand Kein Hing International Berhad's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from RM3.3m 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. And that's as you'd expect, given these boosts are described as 'unusual'. 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).

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

Our Take On Kein Hing International Berhad's Profit Performance

We'd posit that Kein Hing International Berhad's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Kein Hing International Berhad's true underlying earnings power is actually less than its statutory profit. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. 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 Kein Hing International Berhad, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 2 warning signs for Kein Hing International Berhad and you'll want to know about these bad boys.

This note has only looked at a single factor that sheds light on the nature of Kein Hing International 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 that insiders are buying.

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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.