Stock Analysis

Turbo-Mech Berhad's (KLSE:TURBO) Solid Profits Have Weak Fundamentals

KLSE:TURBO
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Turbo-Mech Berhad's (KLSE:TURBO) stock was strong after they reported robust earnings. We did some analysis and think that investors are missing some details hidden beneath the profit numbers.

View our latest analysis for Turbo-Mech Berhad

earnings-and-revenue-history
KLSE:TURBO Earnings and Revenue History May 30th 2022

How Do Unusual Items Influence Profit?

For anyone who wants to understand Turbo-Mech Berhad's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from RM381k worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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. 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 Turbo-Mech Berhad.

Our Take On Turbo-Mech Berhad's Profit Performance

We'd posit that Turbo-Mech Berhad's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Turbo-Mech Berhad's true underlying earnings power is actually less than its statutory profit. The silver lining is that its EPS growth over the last year has been really wonderful, even if it's not a perfect measure. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Case in point: We've spotted 2 warning signs for Turbo-Mech Berhad you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Turbo-Mech 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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

Valuation is complex, but we're here to simplify it.

Discover if Turbo-Mech Berhad might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.

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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.