We Think You Can Look Beyond Wentel Engineering Holdings Berhad's (KLSE:WENTEL) Lackluster Earnings

The market for Wentel Engineering Holdings Berhad's (KLSE:WENTEL) shares didn't move much after it posted weak earnings recently. Our analysis suggests that while the profits are soft, the foundations of the business are strong.

See our latest analysis for Wentel Engineering Holdings Berhad

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Wentel Engineering Holdings Berhad's profit was reduced by RM4.0m, due to unusual items, over the last year. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. If Wentel Engineering Holdings Berhad doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

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

Our Take On Wentel Engineering Holdings Berhad's Profit Performance

Unusual items (expenses) detracted from Wentel Engineering Holdings Berhad's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Wentel Engineering Holdings Berhad's statutory profit actually understates its earnings potential! 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 if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Wentel Engineering Holdings Berhad.

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