Why Mycron Steel Berhad's (KLSE:MYCRON) Earnings Are Better Than They Seem

The market seemed underwhelmed by the solid earnings posted by Mycron Steel Berhad (KLSE:MYCRON) recently. We have done some analysis, and found some encouraging factors that we believe the shareholders should consider.

Check out our latest analysis for Mycron Steel Berhad

How Do Unusual Items Influence Profit?

For anyone who wants to understand Mycron Steel Berhad's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by RM2.4m due to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Mycron Steel 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 Mycron Steel Berhad.

Our Take On Mycron Steel Berhad's Profit Performance

Because unusual items detracted from Mycron Steel Berhad'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 Mycron Steel Berhad's earnings potential is at least as good as it seems, and maybe even better! And one can definitely find a positive in the fact that it made a profit this year, despite losing money 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Case in point: We've spotted 3 warning signs for Mycron Steel Berhad you should be mindful of and 1 of them is concerning.

This note has only looked at a single factor that sheds light on the nature of Mycron Steel Berhad's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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 that insiders are buying.

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This article by Simply Wall St is general in nature. 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.
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