M K Land Holdings Berhad's (KLSE:MKLAND) Shareholders Have More To Worry About Than Only Soft Earnings

The subdued market reaction suggests that M K Land Holdings Berhad's (KLSE:MKLAND) recent earnings didn't contain any surprises. However, we believe that investors should be aware of some underlying factors which may be of concern.

See our latest analysis for M K Land Holdings Berhad

How Do Unusual Items Influence Profit?

For anyone who wants to understand M K Land Holdings Berhad's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from RM55m worth of unusual items. 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 crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And, after all, that's exactly what the accounting terminology implies. M K Land Holdings Berhad had a rather significant contribution from unusual items relative to its profit 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 M K Land Holdings Berhad.

Our Take On M K Land Holdings Berhad's Profit Performance

As we discussed above, we think the significant positive unusual item makes M K Land Holdings Berhad's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that M K Land Holdings Berhad's underlying earnings power is lower than its statutory profit. Sadly, its EPS was down over the last twelve months. 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 while earnings quality is important, it's equally important to consider the risks facing M K Land Holdings Berhad at this point in time. Case in point: We've spotted 2 warning signs for M K Land Holdings Berhad you should be aware of.

This note has only looked at a single factor that sheds light on the nature of M K Land Holdings Berhad's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. 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.