We Wouldn't Rely On KSL Holdings Berhad's (KLSE:KSL) Statutory Earnings As A Guide

It might be old fashioned, but we really like to invest in companies that make a profit, each and every year. 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. This article will consider whether KSL Holdings Berhad's (KLSE:KSL) statutory profits are a good guide to its underlying earnings.

We like the fact that KSL Holdings Berhad made a profit of RM119.3m on its revenue of RM445.3m, in the last year. Below, you can see that both its revenue and its profit have fallen over the last three years.

Check out our latest analysis for KSL Holdings Berhad

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 discuss how unusual items have impacted KSL Holdings Berhad's most recent profit results. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of KSL Holdings Berhad.

The Impact Of Unusual Items On Profit

For anyone who wants to understand KSL Holdings Berhad's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from RM27m worth of unusual items. 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. And, after all, that's exactly what the accounting terminology implies. If KSL Holdings Berhad doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Our Take On KSL Holdings Berhad's Profit Performance

We'd posit that KSL 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 KSL Holdings Berhad's statutory profits are better than its underlying earnings power. In further bad news, its earnings per share decreased 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. 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. Our analysis shows 3 warning signs for KSL Holdings Berhad (1 doesn't sit too well with us!) and we strongly recommend you look at these before investing.

This note has only looked at a single factor that sheds light on the nature of KSL 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 that insiders are buying.

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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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