TSH Resources Berhad's (KLSE:TSH) Earnings Are Weaker Than They Seem

TSH Resources Berhad (KLSE:TSH) announced strong profits, but the stock was stagnant. Our analysis suggests that this might be because shareholders have noticed some concerning underlying factors.

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The Impact Of Unusual Items On Profit

For anyone who wants to understand TSH Resources Berhad's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from RM27m worth of unusual items. 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. And, after all, that's exactly what the accounting terminology implies. If TSH Resources Berhad doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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 TSH Resources Berhad's Profit Performance

Arguably, TSH Resources Berhad's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that TSH Resources Berhad's statutory profits are better than its underlying earnings power. 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. If you'd like to know more about TSH Resources Berhad as a business, it's important to be aware of any risks it's facing. For instance, we've identified 2 warning signs for TSH Resources Berhad (1 doesn't sit too well with us) you should be familiar with.

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