Fiamma Holdings Berhad's (KLSE:FIAMMA) Earnings Are Weaker Than They Seem

Fiamma Holdings Berhad's (KLSE:FIAMMA) stock was strong after they recently reported robust earnings. However, we think that shareholders may be missing some concerning details in the numbers.

See our latest analysis for Fiamma Holdings Berhad

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Fiamma Holdings Berhad's profit received a boost of RM9.9m in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. 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. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

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.

Our Take On Fiamma Holdings Berhad's Profit Performance

We'd posit that Fiamma 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 Fiamma Holdings Berhad's statutory profits are better than its underlying earnings power. Nonetheless, it's still worth noting that its earnings per share have grown at 57% 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. If you'd like to know more about Fiamma Holdings Berhad as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 1 warning sign for Fiamma Holdings Berhad you should know about.

This note has only looked at a single factor that sheds light on the nature of Fiamma 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. 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. 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.