We Think That There Are Issues Underlying Muhibbah Engineering (M) Bhd's (KLSE:MUHIBAH) Earnings

Muhibbah Engineering (M) Bhd.'s (KLSE:MUHIBAH) robust earnings report didn't manage to move the market for its stock. We did some digging, and we found some concerning factors in the details.

Our free stock report includes 2 warning signs investors should be aware of before investing in Muhibbah Engineering (M) Bhd. Read for free now.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Muhibbah Engineering (M) Bhd's profit received a boost of RM16m in unusual items, over the last year. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. 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. Muhibbah Engineering (M) Bhd had a rather significant contribution from unusual items relative to its profit 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.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On Muhibbah Engineering (M) Bhd's Profit Performance

As previously mentioned, Muhibbah Engineering (M) Bhd'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 Muhibbah Engineering (M) Bhd's underlying earnings power is lower than its statutory profit. On the bright side, the company showed enough improvement to book a profit this year, after losing money 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, Muhibbah Engineering (M) Bhd has 2 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 Muhibbah Engineering (M) Bhd's profit. But there are plenty of other ways to inform your opinion of a company. 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. 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.