We Think That There Are Some Issues For Zecon Berhad (KLSE:ZECON) Beyond Its Promising Earnings

Zecon Berhad's (KLSE:ZECON) healthy profit numbers didn't contain any surprises for investors. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers.

Our free stock report includes 4 warning signs investors should be aware of before investing in Zecon Berhad. Read for free now.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Zecon Berhad's profit received a boost of RM45m in unusual items, over the last year. 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. Which is hardly surprising, given the name. Zecon Berhad had a rather significant contribution from unusual items relative to its profit to December 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

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

Our Take On Zecon Berhad's Profit Performance

As we discussed above, we think the significant positive unusual item makes Zecon Berhad's earnings a poor guide to its underlying profitability. For this reason, we think that Zecon Berhad's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. 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. To help with this, we've discovered 4 warning signs (2 don't sit too well with us!) that you ought to be aware of before buying any shares in Zecon Berhad.

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