Impressive Earnings May Not Tell The Whole Story For MSM Malaysia Holdings Berhad (KLSE:MSM)

Despite announcing strong earnings, MSM Malaysia Holdings Berhad's (KLSE:MSM) stock was sluggish. We did some digging and found some worrying underlying problems.

View our latest analysis for MSM Malaysia Holdings Berhad

How Do Unusual Items Influence Profit?

Importantly, our data indicates that MSM Malaysia Holdings Berhad's profit received a boost of RM15m 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 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. If MSM Malaysia Holdings Berhad doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On MSM Malaysia Holdings Berhad's Profit Performance

We'd posit that MSM Malaysia Holdings Berhad's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that MSM Malaysia Holdings Berhad's statutory profits are better than its underlying earnings power. 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 want to do dive deeper into MSM Malaysia Holdings Berhad, you'd also look into what risks it is currently facing. Be aware that MSM Malaysia Holdings Berhad is showing 3 warning signs in our investment analysis and 1 of those is significant...

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