Some Investors May Be Willing To Look Past Pekat Group Berhad's (KLSE:PEKAT) Soft Earnings

Soft earnings didn't appear to concern Pekat Group Berhad's (KLSE:PEKAT) shareholders over the last week. We think that the softer headline numbers might be getting counterbalanced by some positive underlying factors.

View our latest analysis for Pekat Group Berhad

How Do Unusual Items Influence Profit?

For anyone who wants to understand Pekat Group Berhad's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by RM1.9m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Pekat Group Berhad to produce a higher profit next year, all else being equal.

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

Our Take On Pekat Group Berhad's Profit Performance

Unusual items (expenses) detracted from Pekat Group Berhad's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Pekat Group Berhad's statutory profit actually understates its earnings potential! Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example - Pekat Group Berhad has 1 warning sign we think you should be aware of.

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