Cuscapi Berhad's (KLSE:CUSCAPI) Promising Earnings May Rest On Soft Foundations

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

Our free stock report includes 1 warning sign investors should be aware of before investing in Cuscapi Berhad. Read for free now.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Cuscapi Berhad's profit received a boost of RM1.6m 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 analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. 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).

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

Our Take On Cuscapi Berhad's Profit Performance

Arguably, Cuscapi Berhad's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Cuscapi Berhad's true underlying earnings power is actually less than its statutory profit. The silver lining is that its EPS growth over the last year has been really wonderful, even if it's not a perfect measure. 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. If you'd like to know more about Cuscapi Berhad as a business, it's important to be aware of any risks it's facing. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Cuscapi Berhad.

This note has only looked at a single factor that sheds light on the nature of Cuscapi 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 with significant insider holdings to be useful.

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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.