Stock Analysis

Does Glomac Berhad's (KLSE:GLOMAC) Statutory Profit Adequately Reflect Its Underlying Profit?

KLSE:GLOMAC
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Statistically speaking, it is less risky to invest in profitable companies than in unprofitable ones. Having said that, sometimes statutory profit levels are not a good guide to ongoing profitability, because some short term one-off factor has impacted profit levels. Today we'll focus on whether this year's statutory profits are a good guide to understanding Glomac Berhad (KLSE:GLOMAC).

While Glomac Berhad was able to generate revenue of RM283.9m in the last twelve months, we think its profit result of RM15.4m was more important. Even though its revenue is down over the last three years, its profit has actually increased, as you can see, below.

See our latest analysis for Glomac Berhad

earnings-and-revenue-history
KLSE:GLOMAC Earnings and Revenue History December 23rd 2020

Not all profits are equal, and we can learn more about the nature of a company's past profitability by diving deeper into the financial statements. This article will discuss how unusual items have impacted Glomac Berhad's most recent profit results. 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.

The Impact Of Unusual Items On Profit

For anyone who wants to understand Glomac Berhad's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by RM25m due to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. 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. Assuming those unusual expenses don't come up again, we'd therefore expect Glomac Berhad to produce a higher profit next year, all else being equal.

Our Take On Glomac Berhad's Profit Performance

Because unusual items detracted from Glomac Berhad's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Glomac Berhad's earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share have grown at an extremely impressive rate over the last three years. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Every company has risks, and we've spotted 5 warning signs for Glomac Berhad (of which 1 makes us a bit uncomfortable!) you should know about.

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