Solid Earnings Reflect Melewar Industrial Group Berhad's (KLSE:MELEWAR) Strength As A Business

Melewar Industrial Group Berhad's (KLSE:MELEWAR) earnings announcement last week was disappointing for investors, despite the decent profit numbers. We did some digging and actually think they are being unnecessarily pessimistic.

Check out our latest analysis for Melewar Industrial Group Berhad

The Impact Of Unusual Items On Profit

For anyone who wants to understand Melewar Industrial Group Berhad's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by RM2.9m 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 that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Melewar Industrial Group Berhad to produce a higher profit next year, all else being equal.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Melewar Industrial Group Berhad.

Our Take On Melewar Industrial Group Berhad's Profit Performance

Unusual items (expenses) detracted from Melewar Industrial Group Berhad's earnings over the last year, but we might see an improvement next year. Because of this, we think Melewar Industrial Group Berhad's earnings potential is at least as good as it seems, and maybe even better! And it's also positive that the company showed enough improvement to book a profit this year, after losing money 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. If you'd like to know more about Melewar Industrial Group 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 Melewar Industrial Group Berhad (1 is concerning) you should be familiar with.

This note has only looked at a single factor that sheds light on the nature of Melewar Industrial Group 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.