Minho (M) Berhad's (KLSE:MINHO) Shareholders Have More To Worry About Than Only Soft Earnings

A lackluster earnings announcement from Minho (M) Berhad (KLSE:MINHO) last week didn't sink the stock price. We think that investors are worried about some weaknesses underlying the earnings.

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How Do Unusual Items Influence Profit?

For anyone who wants to understand Minho (M) Berhad's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from RM1.3m 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 analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. If Minho (M) Berhad doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Minho (M) Berhad.

Our Take On Minho (M) Berhad's Profit Performance

We'd posit that Minho (M) Berhad's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Minho (M) Berhad's statutory profits are better than its underlying earnings power. In further bad news, its earnings per share decreased in the last year. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. If you'd like to know more about Minho (M) Berhad as a business, it's important to be aware of any risks it's facing. At Simply Wall St, we found 2 warning signs for Minho (M) Berhad and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of Minho (M) 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.