Are Riverview Rubber Estates Berhad's (KLSE:RVIEW) Statutory Earnings A Good Guide To Its Underlying Profitability?

Broadly speaking, profitable businesses are less risky than unprofitable ones. Having said that, sometimes statutory profit levels are not a good guide to ongoing profitability, because some short term one-off factor has impacted profit levels. In this article, we'll look at how useful this year's statutory profit is, when analysing Riverview Rubber Estates Berhad (KLSE:RVIEW).

It's good to see that over the last twelve months Riverview Rubber Estates Berhad made a profit of RM8.05m on revenue of RM33.5m. In the last few years both its revenue and its profit have fallen, as you can see in the chart below.

View our latest analysis for Riverview Rubber Estates Berhad

Of course, when it comes to statutory profit, the devil is often in the detail, and we can get a better sense for a company by diving deeper into the financial statements. This article will focus on the impact unusual items have had on Riverview Rubber Estates Berhad's statutory earnings. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Riverview Rubber Estates Berhad.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Riverview Rubber Estates Berhad's profit was reduced by RM3.0m, due to unusual items, over the last year. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Riverview Rubber Estates Berhad to produce a higher profit next year, all else being equal.

Our Take On Riverview Rubber Estates Berhad's Profit Performance

Because unusual items detracted from Riverview Rubber Estates Berhad's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Riverview Rubber Estates Berhad's earnings potential is at least as good as it seems, and maybe even better! Furthermore, it has done a great job growing EPS over the 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. To help with this, we've discovered 3 warning signs (1 is potentially serious!) that you ought to be aware of before buying any shares in Riverview Rubber Estates Berhad.

Today we've zoomed in on a single data point to better understand the nature of Riverview Rubber Estates 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. 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.
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