Scope Industries Berhad's (KLSE:SCOPE) Earnings Seem To Be Promising

The stock was sluggish on the back of Scope Industries Berhad's (KLSE:SCOPE) recent earnings report. Our analysis suggests that there are some reasons for hope that investors should be aware of.

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The Impact Of Unusual Items On Profit

Importantly, our data indicates that Scope Industries Berhad's profit was reduced by RM4.6m, due to unusual items, over the last year. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Scope Industries Berhad to produce a higher profit next year, all else being equal.

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

Our Take On Scope Industries Berhad's Profit Performance

Because unusual items detracted from Scope Industries Berhad's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Scope Industries Berhad's statutory profit actually understates its earnings potential! And it's also positive that the company showed enough improvement to book a profit this year, after losing money last year. 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. To that end, you should learn about the 2 warning signs we've spotted with Scope Industries Berhad (including 1 which is concerning).

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