We Like Naim Holdings Berhad's (KLSE:NAIM) Earnings For More Than Just Statutory Profit

The market seemed underwhelmed by last week's earnings announcement from Naim Holdings Berhad (KLSE:NAIM) despite the healthy numbers. We did some analysis to find out why and believe that investors might be missing some encouraging factors contained in the earnings.

Check out our latest analysis for Naim Holdings Berhad

How Do Unusual Items Influence Profit?

For anyone who wants to understand Naim Holdings Berhad's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by RM2.5m due to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. If Naim Holdings Berhad doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

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

Our Take On Naim Holdings Berhad's Profit Performance

Because unusual items detracted from Naim Holdings Berhad's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Naim Holdings Berhad's earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share have grown at an extremely impressive rate over 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. So while earnings quality is important, it's equally important to consider the risks facing Naim Holdings Berhad at this point in time. Our analysis shows 2 warning signs for Naim Holdings Berhad (1 is potentially serious!) and we strongly recommend you look at them before investing.

Today we've zoomed in on a single data point to better understand the nature of Naim Holdings 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.