Kossan Rubber Industries Bhd's (KLSE:KOSSAN) Strong Earnings Are Of Good Quality

Even though Kossan Rubber Industries Bhd's (KLSE:KOSSAN) recent earnings release was robust, the market didn't seem to notice. Our analysis suggests that investors might be missing some promising details.

Check out our latest analysis for Kossan Rubber Industries Bhd

How Do Unusual Items Influence Profit?

For anyone who wants to understand Kossan Rubber Industries Bhd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by RM35m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Kossan Rubber Industries Bhd to produce a higher profit next year, all else being equal.

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 Kossan Rubber Industries Bhd's Profit Performance

Because unusual items detracted from Kossan Rubber Industries Bhd'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 Kossan Rubber Industries Bhd's earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share have grown at an extremely impressive rate over the last year. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example - Kossan Rubber Industries Bhd has 2 warning signs we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Kossan Rubber Industries Bhd'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. 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.

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.