Additional Considerations Required While Assessing Carimin Petroleum Berhad's (KLSE:CARIMIN) Strong Earnings

Carimin Petroleum Berhad (KLSE:CARIMIN) announced strong profits, but the stock was stagnant. Our analysis suggests that this might be because shareholders have noticed some concerning underlying factors.

View our latest analysis for Carimin Petroleum Berhad

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Carimin Petroleum Berhad's profit received a boost of RM21m 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. 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, after all, that's exactly what the accounting terminology implies. Carimin Petroleum 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 Carimin Petroleum Berhad.

Our Take On Carimin Petroleum Berhad's Profit Performance

As we discussed above, we think the significant positive unusual item makes Carimin Petroleum Berhad's earnings a poor guide to its underlying profitability. For this reason, we think that Carimin Petroleum 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. But the good news is that its EPS growth over the last three years has been very impressive. 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. If you'd like to know more about Carimin Petroleum Berhad as a business, it's important to be aware of any risks it's facing. For example, we've discovered 3 warning signs that you should run your eye over to get a better picture of Carimin Petroleum Berhad.

This note has only looked at a single factor that sheds light on the nature of Carimin Petroleum 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. 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.