Should You Rely On Wee Hur Holdings's (SGX:E3B) Earnings Growth?

Statistically speaking, it is less risky to invest in profitable companies than in unprofitable ones. 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. This article will consider whether Wee Hur Holdings' (SGX:E3B) statutory profits are a good guide to its underlying earnings.

While Wee Hur Holdings was able to generate revenue of S$195.5m in the last twelve months, we think its profit result of S$39.1m was more important. One positive is that it has grown both its profit and its revenue, over the last few years.

See our latest analysis for Wee Hur Holdings

Of course, it is only sensible to look beyond the statutory profits and question how well those numbers represent the sustainable earnings power of the business. This article will focus on the impact unusual items have had on Wee Hur Holdings' statutory earnings. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Wee Hur Holdings.

The Impact Of Unusual Items On Profit

For anyone who wants to understand Wee Hur Holdings' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from S$2.6m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And, after all, that's exactly what the accounting terminology implies. If Wee Hur Holdings doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Our Take On Wee Hur Holdings' Profit Performance

Arguably, Wee Hur Holdings' statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Wee Hur Holdings' true underlying earnings power is actually less than its statutory profit. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. So while earnings quality is important, it's equally important to consider the risks facing Wee Hur Holdings at this point in time. For example, we've found that Wee Hur Holdings has 3 warning signs (2 are a bit concerning!) that deserve your attention before going any further with your analysis.

This note has only looked at a single factor that sheds light on the nature of Wee Hur Holdings' 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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