We're Not So Sure You Should Rely on GuocoLand's (SGX:F17) Statutory Earnings

Broadly speaking, profitable businesses are less risky than unprofitable ones. That said, the current statutory profit is not always a good guide to a company's underlying profitability. In this article, we'll look at how useful this year's statutory profit is, when analysing GuocoLand (SGX:F17).

While GuocoLand was able to generate revenue of S$941.8m in the last twelve months, we think its profit result of S$95.1m was more important. The chart below shows that both revenue and profit have declined over the last three years.

See our latest analysis for GuocoLand

Of course, when it comes to statutory profit, the devil is often in the detail, and we can get a better sense for a company by diving deeper into the financial statements. This article will discuss how unusual items have impacted GuocoLand's most recent profit results. 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?

Importantly, our data indicates that GuocoLand's profit received a boost of S$75m in unusual items, over the last year. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. Which is hardly surprising, given the name. GuocoLand had a rather significant contribution from unusual items relative to its profit to June 2020. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

Our Take On GuocoLand's Profit Performance

As we discussed above, we think the significant positive unusual item makes GuocoLand'searnings a poor guide to its underlying profitability. As a result, we think it may well be the case that GuocoLand's underlying earnings power is lower than its statutory profit. In further bad news, its earnings per share decreased 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. If you'd like to know more about GuocoLand as a business, it's important to be aware of any risks it's facing. To help with this, we've discovered 5 warning signs (2 are potentially serious!) that you ought to be aware of before buying any shares in GuocoLand.

Today we've zoomed in on a single data point to better understand the nature of GuocoLand'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. 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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