B.I.G. Industries Berhad's (KLSE:BIG) Promising Earnings May Rest On Soft Foundations

Unsurprisingly, B.I.G. Industries Berhad's (KLSE:BIG) stock price was strong on the back of its healthy earnings report. However, our analysis suggests that shareholders may be missing some factors that indicate the earnings result was not as good as it looked.

Check out our latest analysis for B.I.G. Industries Berhad

How Do Unusual Items Influence Profit?

For anyone who wants to understand B.I.G. Industries Berhad's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from RM4.5m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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. We can see that B.I.G. Industries Berhad's positive unusual items were quite significant relative to its profit in the year 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.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of B.I.G. Industries Berhad.

Our Take On B.I.G. Industries Berhad's Profit Performance

As previously mentioned, B.I.G. Industries Berhad's large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. For this reason, we think that B.I.G. Industries Berhad's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. 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. If you'd like to know more about B.I.G. Industries 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 B.I.G. Industries Berhad (1 is significant) you should be familiar with.

Today we've zoomed in on a single data point to better understand the nature of B.I.G. Industries 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. 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.