Rimbunan Sawit Berhad's (KLSE:RSAWIT) Promising Earnings May Rest On Soft Foundations

Despite posting some strong earnings, the market for Rimbunan Sawit Berhad's (KLSE:RSAWIT) stock hasn't moved much. Our analysis suggests that this might be because shareholders have noticed some concerning underlying factors.

View our latest analysis for Rimbunan Sawit Berhad

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Rimbunan Sawit Berhad's profit received a boost of RM4.2m in unusual items, over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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. Which is hardly surprising, given the name. We can see that Rimbunan Sawit Berhad's positive unusual items were quite significant relative to its profit in the year to March 2022. 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 Rimbunan Sawit Berhad.

Our Take On Rimbunan Sawit Berhad's Profit Performance

As we discussed above, we think the significant positive unusual item makes Rimbunan Sawit Berhad's earnings a poor guide to its underlying profitability. For this reason, we think that Rimbunan Sawit 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. The good news is that it earned a profit in the last twelve months, despite its previous loss. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. To help with this, we've discovered 3 warning signs (1 can't be ignored!) that you ought to be aware of before buying any shares in Rimbunan Sawit Berhad.

Today we've zoomed in on a single data point to better understand the nature of Rimbunan Sawit 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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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.