Knusford Berhad's (KLSE:KNUSFOR) Shareholders May Want To Dig Deeper Than Statutory Profit

Knusford Berhad's (KLSE:KNUSFOR ) stock didn't jump after it announced some healthy earnings. We did some digging and believe investors may be worried about some underlying factors in the report.

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The Impact Of Unusual Items On Profit

To properly understand Knusford Berhad's profit results, we need to consider the RM1.9m 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. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And that's as you'd expect, given these boosts are described as 'unusual'. If Knusford Berhad doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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

Our Take On Knusford Berhad's Profit Performance

We'd posit that Knusford Berhad's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Knusford Berhad's statutory profits are better than its underlying earnings power. The good news is that, its earnings per share increased by 15% in 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. If you want to do dive deeper into Knusford Berhad, you'd also look into what risks it is currently facing. To that end, you should learn about the 2 warning signs we've spotted with Knusford Berhad (including 1 which shouldn't be ignored).

This note has only looked at a single factor that sheds light on the nature of Knusford Berhad'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 with significant insider holdings to be useful.

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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.