Investors Shouldn't Be Too Comfortable With Tomei Consolidated Berhad's (KLSE:TOMEI) Robust Earnings

Tomei Consolidated Berhad (KLSE:TOMEI) announced strong profits, but the stock was stagnant. We did some digging, and we found some concerning factors in the details.

See our latest analysis for Tomei Consolidated Berhad

The Impact Of Unusual Items On Profit

For anyone who wants to understand Tomei Consolidated Berhad's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from RM3.3m 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 that's as you'd expect, given these boosts are described as 'unusual'. If Tomei Consolidated Berhad doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Tomei Consolidated Berhad.

Our Take On Tomei Consolidated Berhad's Profit Performance

Arguably, Tomei Consolidated Berhad's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Tomei Consolidated Berhad's true underlying earnings power is actually less than its statutory profit. But the good news is that its EPS growth over the last three years has been very impressive. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. To that end, you should learn about the 3 warning signs we've spotted with Tomei Consolidated Berhad (including 1 which is potentially serious).

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