There May Be Underlying Issues With The Quality Of Oversea Enterprise Berhad's (KLSE:OVERSEA) Earnings

Oversea Enterprise Berhad's (KLSE:OVERSEA) robust earnings report didn't manage to move the market for its stock. Our analysis suggests that this might be because shareholders have noticed some concerning underlying factors.

See our latest analysis for Oversea Enterprise Berhad

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Oversea Enterprise Berhad's profit received a boost of RM8.4m 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 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. Oversea Enterprise Berhad had a rather significant contribution from unusual items relative to its profit to June 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

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

Our Take On Oversea Enterprise Berhad's Profit Performance

As we discussed above, we think the significant positive unusual item makes Oversea Enterprise Berhad's earnings a poor guide to its underlying profitability. For this reason, we think that Oversea Enterprise 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. 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 Oversea Enterprise Berhad as a business, it's important to be aware of any risks it's facing. When we did our research, we found 3 warning signs for Oversea Enterprise Berhad (1 is concerning!) that we believe deserve your full attention.

Today we've zoomed in on a single data point to better understand the nature of Oversea Enterprise Berhad's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.