Does Malakoff Corporation Berhad's (KLSE:MALAKOF) Statutory Profit Adequately Reflect Its Underlying Profit?

It might be old fashioned, but we really like to invest in companies that make a profit, each and every year. However, sometimes companies receive a one-off boost (or reduction) to their profit, and it's not always clear whether statutory profits are a good guide, going forward. Today we'll focus on whether this year's statutory profits are a good guide to understanding Malakoff Corporation Berhad (KLSE:MALAKOF).

It's good to see that over the last twelve months Malakoff Corporation Berhad made a profit of RM343.4m on revenue of RM6.48b. The chart below shows that both revenue and profit have declined over the last three years.

View our latest analysis for Malakoff Corporation Berhad

Not all profits are equal, and we can learn more about the nature of a company's past profitability by diving deeper into the financial statements. This article will focus on the impact unusual items have had on Malakoff Corporation Berhad's statutory earnings. That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Malakoff Corporation Berhad's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by RM413m 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, after all, that's exactly what the accounting terminology implies. If Malakoff Corporation Berhad doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Our Take On Malakoff Corporation Berhad's Profit Performance

Because unusual items detracted from Malakoff Corporation 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 Malakoff Corporation Berhad's statutory profit actually understates its earnings potential! And the EPS is up 39% over the last twelve months. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. If you'd like to know more about Malakoff Corporation Berhad as a business, it's important to be aware of any risks it's facing. To help with this, we've discovered 3 warning signs (2 are concerning!) that you ought to be aware of before buying any shares in Malakoff Corporation Berhad.

Today we've zoomed in on a single data point to better understand the nature of Malakoff Corporation Berhad's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. 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 that insiders are buying to be useful.

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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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