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

By
Simply Wall St
Published
September 01, 2021
KLSE:MSM
Source: Shutterstock

Unsurprisingly, MSM Malaysia Holdings Berhad's (KLSE:MSM) stock price was strong on the back of its healthy earnings report. 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 MSM Malaysia Holdings Berhad

earnings-and-revenue-history
KLSE:MSM Earnings and Revenue History September 1st 2021

The Impact Of Unusual Items On Profit

For anyone who wants to understand MSM Malaysia Holdings Berhad's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from RM23m worth of unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. 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. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. At Simply Wall St, we found 2 warning signs for MSM Malaysia Holdings Berhad and we think they deserve your attention.

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. 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. 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 that insiders are buying to be useful.

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