We Think That There Are Some Issues For GuocoLand (Malaysia) Berhad (KLSE:GUOCO) Beyond Its Promising Earnings

The recent earnings posted by GuocoLand (Malaysia) Berhad (KLSE:GUOCO) were solid, but the stock didn't move as much as we expected. However the statutory profit number doesn't tell the whole story, and we have found some factors which might be of concern to shareholders.

Check out our latest analysis for GuocoLand (Malaysia) Berhad

How Do Unusual Items Influence Profit?

Importantly, our data indicates that GuocoLand (Malaysia) Berhad's profit received a boost of RM40m in unusual items, over the last year. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. We can see that GuocoLand (Malaysia) Berhad's positive unusual items were quite significant relative to its profit in the year to June 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger 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 GuocoLand (Malaysia) Berhad.

Our Take On GuocoLand (Malaysia) Berhad's Profit Performance

As we discussed above, we think the significant positive unusual item makes GuocoLand (Malaysia) Berhad's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that GuocoLand (Malaysia) Berhad's underlying earnings power is lower than its statutory profit. The good news is that, its earnings per share increased by 57% in the last year. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. In terms of investment risks, we've identified 2 warning signs with GuocoLand (Malaysia) Berhad, and understanding them should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of GuocoLand (Malaysia) 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 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.