Some Investors May Be Willing To Look Past AGX Group Berhad's (KLSE:AGX) Soft Earnings

Shareholders appeared unconcerned with AGX Group Berhad's (KLSE:AGX) lackluster earnings report last week. We did some digging, and we believe the earnings are stronger than they seem.

See our latest analysis for AGX Group Berhad

How Do Unusual Items Influence Profit?

For anyone who wants to understand AGX Group Berhad's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by RM2.3m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect AGX Group 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 AGX Group Berhad.

Our Take On AGX Group Berhad's Profit Performance

Because unusual items detracted from AGX Group 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 AGX Group Berhad's statutory profit actually understates its earnings potential! And the EPS is up 34% annually, 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 AGX Group Berhad as a business, it's important to be aware of any risks it's facing. While conducting our analysis, we found that AGX Group Berhad has 3 warning signs and it would be unwise to ignore them.

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