Earnings Troubles May Signal Larger Issues for Sime Darby Plantation Berhad (KLSE:SIMEPLT) Shareholders

A lackluster earnings announcement from Sime Darby Plantation Berhad (KLSE:SIMEPLT) 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 Sime Darby Plantation Berhad

How Do Unusual Items Influence Profit?

For anyone who wants to understand Sime Darby Plantation Berhad's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from RM1.0b worth of 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. 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. Sime Darby Plantation Berhad had a rather significant contribution from unusual items relative to its profit to December 2023. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

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 Sime Darby Plantation Berhad's Profit Performance

As we discussed above, we think the significant positive unusual item makes Sime Darby Plantation Berhad's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Sime Darby Plantation Berhad's underlying earnings power is lower than its statutory profit. Nonetheless, it's still worth noting that its earnings per share have grown at 67% over the last three years. 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. If you want to do dive deeper into Sime Darby Plantation Berhad, you'd also look into what risks it is currently facing. For example, Sime Darby Plantation Berhad has 3 warning signs (and 1 which is a bit concerning) we think you should know about.

Today we've zoomed in on a single data point to better understand the nature of Sime Darby Plantation Berhad's profit. But there are plenty of other ways to inform your opinion of a company. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.