We Think That There Are Issues Underlying Paragon Union Berhad's (KLSE:PARAGON) Earnings

Paragon Union Berhad's (KLSE:PARAGON) stock was strong after they recently reported robust earnings. However, our analysis suggests that shareholders may be missing some factors that indicate the earnings result was not as good as it looked.

See our latest analysis for Paragon Union Berhad

The Impact Of Unusual Items On Profit

For anyone who wants to understand Paragon Union Berhad's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from RM15m 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 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. And that's as you'd expect, given these boosts are described as 'unusual'. We can see that Paragon Union Berhad's positive unusual items were quite significant relative to its profit in the year to March 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 Paragon Union Berhad.

Our Take On Paragon Union Berhad's Profit Performance

As previously mentioned, Paragon Union Berhad's large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. As a result, we think it may well be the case that Paragon Union Berhad's underlying earnings power is lower than its statutory profit. On the bright side, the company showed enough improvement to book a profit this year, after losing money last year. 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. If you'd like to know more about Paragon Union Berhad as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 2 warning signs for Paragon Union Berhad you should know about.

Today we've zoomed in on a single data point to better understand the nature of Paragon Union Berhad's profit. But there are plenty of other ways to inform your opinion of a company. 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 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.