Stock Analysis

Should You Use Ta Ann Holdings Berhad's (KLSE:TAANN) Statutory Earnings To Analyse It?

KLSE:TAANN
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As a general rule, we think profitable companies are less risky than companies that lose money. That said, the current statutory profit is not always a good guide to a company's underlying profitability. This article will consider whether Ta Ann Holdings Berhad's (KLSE:TAANN) statutory profits are a good guide to its underlying earnings.

While Ta Ann Holdings Berhad was able to generate revenue of RM1.14b in the last twelve months, we think its profit result of RM82.1m was more important. Below, you can see that both its revenue and its profit have fallen over the last three years.

See our latest analysis for Ta Ann Holdings Berhad

earnings-and-revenue-history
KLSE:TAANN Earnings and Revenue History December 15th 2020

Importantly, statutory profits are not always the best tool for understanding a company's true earnings power, so it's well worth examining profits in a little more detail. This article will focus on the impact unusual items have had on Ta Ann Holdings Berhad's statutory earnings. That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Ta Ann Holdings Berhad's profit received a boost of RM20m in unusual items, over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

Our Take On Ta Ann Holdings Berhad's Profit Performance

We'd posit that Ta Ann Holdings 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 Ta Ann Holdings Berhad's statutory profits are better than its underlying earnings power. The good news is that, its earnings per share increased by 35% 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. You'd be interested to know, that we found 1 warning sign for Ta Ann Holdings Berhad and you'll want to know about it.

Today we've zoomed in on a single data point to better understand the nature of Ta Ann Holdings 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. 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 that insiders are buying to be useful.

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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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