Eversendai Corporation Berhad (KLSE:SENDAI) Strong Profits May Be Masking Some Underlying Issues

Eversendai Corporation Berhad's (KLSE:SENDAI) robust recent earnings didn't do much to move the stock. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers.

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The Impact Of Unusual Items On Profit

For anyone who wants to understand Eversendai Corporation 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. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. 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, after all, that's exactly what the accounting terminology implies. 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 Eversendai Corporation Berhad.

Our Take On Eversendai Corporation Berhad's Profit Performance

Arguably, Eversendai Corporation Berhad's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Eversendai Corporation Berhad's true underlying earnings power is actually less than its statutory profit. The good news is that its earnings per share increased slightly in the last year. 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. If you want to do dive deeper into Eversendai Corporation Berhad, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 2 warning signs for Eversendai Corporation Berhad (of which 1 shouldn't be ignored!) you should know about.

Today we've zoomed in on a single data point to better understand the nature of Eversendai Corporation Berhad'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.