Additional Considerations Required While Assessing TH Plantations Berhad's (KLSE:THPLANT) Strong Earnings

TH Plantations Berhad (KLSE:THPLANT) announced strong profits, but the stock was stagnant. We did some digging, and we found some concerning factors in the details.

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How Do Unusual Items Influence Profit?

Importantly, our data indicates that TH Plantations Berhad's profit received a boost of RM23m in unusual items, over the last year. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. 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. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

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 TH Plantations Berhad's Profit Performance

We'd posit that TH Plantations Berhad's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that TH Plantations Berhad's true underlying earnings power is actually less than its statutory profit. The silver lining is that its EPS growth over the last year has been really wonderful, even if it's not a perfect measure. 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 while earnings quality is important, it's equally important to consider the risks facing TH Plantations Berhad at this point in time. You'd be interested to know, that we found 2 warning signs for TH Plantations Berhad and you'll want to know about these bad boys.

This note has only looked at a single factor that sheds light on the nature of TH Plantations Berhad's profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. 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 with significant insider holdings 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.