Impressive Earnings May Not Tell The Whole Story For Harbour-Link Group Berhad (KLSE:HARBOUR)

Last week's profit announcement from Harbour-Link Group Berhad (KLSE:HARBOUR) was underwhelming for investors, despite headline numbers being robust. We think that the market might be paying attention to some underlying factors that they find to be concerning.

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The Impact Of Unusual Items On Profit

To properly understand Harbour-Link Group Berhad's profit results, we need to consider the RM10.0m gain attributed to unusual items. 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. 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 Harbour-Link Group Berhad.

Our Take On Harbour-Link Group Berhad's Profit Performance

Arguably, Harbour-Link Group Berhad's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Harbour-Link Group Berhad's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 27% EPS growth in the 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. If you want to do dive deeper into Harbour-Link Group Berhad, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 1 warning sign with Harbour-Link Group Berhad, and understanding it should be part of your investment process.

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