Weak Statutory Earnings May Not Tell The Whole Story For Far East Orchard (SGX:O10)

Far East Orchard Limited's (SGX:O10) recent weak earnings report didn't cause a big stock movement. However, we believe that investors should be aware of some underlying factors which may be of concern.

We've discovered 2 warning signs about Far East Orchard. View them for free.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Far East Orchard's profit received a boost of S$38m in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. Far East Orchard had a rather significant contribution from unusual items relative to its profit to December 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Far East Orchard.

Our Take On Far East Orchard's Profit Performance

As we discussed above, we think the significant positive unusual item makes Far East Orchard's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Far East Orchard's underlying earnings power is lower than its statutory profit. But the good news is that its EPS growth over the last three years has been very impressive. 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 want to do dive deeper into Far East Orchard, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 2 warning signs for Far East Orchard and you'll want to know about them.

This note has only looked at a single factor that sheds light on the nature of Far East Orchard'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. 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.