SD Guthrie Berhad's (KLSE:SDG) Weak Earnings May Only Reveal A Part Of The Whole Picture

A lackluster earnings announcement from SD Guthrie Berhad (KLSE:SDG) last week didn't sink the stock price. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

View our latest analysis for SD Guthrie Berhad

How Do Unusual Items Influence Profit?

To properly understand SD Guthrie Berhad's profit results, we need to consider the RM1.0b gain attributed to unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. SD Guthrie Berhad had a rather significant contribution from unusual items relative to its profit to September 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

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 SD Guthrie Berhad's Profit Performance

As we discussed above, we think the significant positive unusual item makes SD Guthrie Berhad's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that SD Guthrie Berhad's underlying earnings power is lower than its statutory profit. Sadly, its EPS was down over the last twelve months. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. While conducting our analysis, we found that SD Guthrie Berhad has 2 warning signs and it would be unwise to ignore these.

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