Statutory Profit Doesn't Reflect How Good Fraser and Neave's (SGX:F99) Earnings Are

Fraser and Neave, Limited (SGX:F99) just reported healthy earnings but the stock price didn't move much. Investors are probably missing some underlying factors which are encouraging for the future of the company.

View our latest analysis for Fraser and Neave

How Do Unusual Items Influence Profit?

For anyone who wants to understand Fraser and Neave's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by S$21m 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. 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 Fraser and Neave doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

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.

Our Take On Fraser and Neave's Profit Performance

Because unusual items detracted from Fraser and Neave'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 Fraser and Neave's statutory profit actually understates its earnings potential! And on top of that, its earnings per share increased by 12% in the last year. 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. 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. While conducting our analysis, we found that Fraser and Neave has 1 warning sign and it would be unwise to ignore this.

Today we've zoomed in on a single data point to better understand the nature of Fraser and Neave's profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.