Concerns Surrounding Unimech Group Berhad's (KLSE:UNIMECH) Performance

Unimech Group Berhad's (KLSE:UNIMECH) robust recent earnings didn't do much to move the stock. We think this is due to investors looking beyond the statutory profits and being concerned with what they see.

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The Impact Of Unusual Items On Profit

Importantly, our data indicates that Unimech Group Berhad's profit received a boost of RM3.6m in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. 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. If Unimech Group Berhad doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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

Our Take On Unimech Group Berhad's Profit Performance

Arguably, Unimech Group Berhad's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Unimech Group Berhad's statutory profits are better than its underlying earnings power. The good news is that, its earnings per share increased by 5.2% in 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. In terms of investment risks, we've identified 2 warning signs with Unimech Group Berhad, and understanding them should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of Unimech Group 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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.