We Think HG Metal Manufacturing's (SGX:BTG) Solid Earnings Are Understated

HG Metal Manufacturing Limited's (SGX:BTG) solid earnings announcement recently didn't do much to the stock price. We did some analysis to find out why and believe that investors might be missing some encouraging factors contained in the earnings.

Check out our latest analysis for HG Metal Manufacturing

How Do Unusual Items Influence Profit?

For anyone who wants to understand HG Metal Manufacturing's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by S$1.5m due to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. If HG Metal Manufacturing doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of HG Metal Manufacturing.

Our Take On HG Metal Manufacturing's Profit Performance

Because unusual items detracted from HG Metal Manufacturing's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think HG Metal Manufacturing's earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share have grown at an extremely impressive rate over 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. 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. Every company has risks, and we've spotted 1 warning sign for HG Metal Manufacturing you should know about.

Today we've zoomed in on a single data point to better understand the nature of HG Metal Manufacturing's profit. But there are plenty of other ways to inform your opinion of a company. 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. 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.
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