Does Berjaya Land Berhad's (KLSE:BJLAND) Statutory Profit Adequately Reflect Its Underlying Profit?

It might be old fashioned, but we really like to invest in companies that make a profit, each and every year. Having said that, sometimes statutory profit levels are not a good guide to ongoing profitability, because some short term one-off factor has impacted profit levels. Today we'll focus on whether this year's statutory profits are a good guide to understanding Berjaya Land Berhad (KLSE:BJLAND).

While Berjaya Land Berhad was able to generate revenue of RM6.26b in the last twelve months, we think its profit result of RM132.1m was more important. Even though revenue has remained steady over the last three years, you can see in the chart below that the company has moved from loss-making to profitable.

Check out our latest analysis for Berjaya Land Berhad

Not all profits are equal, and we can learn more about the nature of a company's past profitability by diving deeper into the financial statements. This article will focus on the impact unusual items have had on Berjaya Land Berhad's statutory earnings. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Berjaya Land Berhad.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Berjaya Land Berhad's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by RM54m due to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. If Berjaya Land Berhad doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Our Take On Berjaya Land Berhad's Profit Performance

Because unusual items detracted from Berjaya Land Berhad's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Berjaya Land Berhad's statutory profit actually understates its earnings potential! And one can definitely find a positive in the fact that it made a profit this year, despite losing money 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. While earnings are important, another area to consider is the balance sheet. You can seeour latest analysis on Berjaya Land Berhad's balance sheet health here.

This note has only looked at a single factor that sheds light on the nature of Berjaya Land 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 that insiders are buying.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.