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

The subdued market reaction suggests that Minho (M) Berhad's (KLSE:MINHO) recent earnings didn't contain any surprises. However, we believe that investors should be aware of some underlying factors which may be of concern.

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The Impact Of Unusual Items On Profit

To properly understand Minho (M) Berhad's profit results, we need to consider the RM1.3m gain attributed to unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And, after all, that's exactly what the accounting terminology implies. 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

Arguably, Minho (M) Berhad's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Minho (M) Berhad's true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased in the last year. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Case in point: We've spotted 3 warning signs for Minho (M) Berhad you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Minho (M) 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. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful.

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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.