We Think RGT Berhad's (KLSE:RGTBHD) Robust Earnings Are Conservative

The subdued stock price reaction suggests that RGT Berhad's (KLSE:RGTBHD) strong earnings didn't offer any surprises. Our analysis suggests that investors might be missing some promising details.

Check out our latest analysis for RGT Berhad

The Impact Of Unusual Items On Profit

To properly understand RGT Berhad's profit results, we need to consider the RM946k expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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. RGT Berhad took a rather significant hit from unusual items in the year to June 2024. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be.

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

Our Take On RGT Berhad's Profit Performance

As we discussed above, we think the significant unusual expense will make RGT Berhad's statutory profit lower than it would otherwise have been. Because of this, we think RGT Berhad's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! And on top of that, its earnings per share have grown at an extremely impressive rate over 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. So while earnings quality is important, it's equally important to consider the risks facing RGT Berhad at this point in time. When we did our research, we found 3 warning signs for RGT Berhad (1 doesn't sit too well with us!) that we believe deserve your full attention.

Today we've zoomed in on a single data point to better understand the nature of RGT 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.