Thakral's (SGX:AWI) Soft Earnings Are Actually Better Than They Appear

Shareholders appeared unconcerned with Thakral Corporation Ltd's (SGX:AWI) lackluster earnings report last week. Our analysis suggests that while the profits are soft, the foundations of the business are strong.

Check out our latest analysis for Thakral

The Impact Of Unusual Items On Profit

To properly understand Thakral's profit results, we need to consider the S$20m expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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. In the twelve months to December 2023, Thakral had a big unusual items expense. As a result, we can surmise that the unusual items made its statutory profit significantly weaker 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 Thakral.

Our Take On Thakral's Profit Performance

As we mentioned previously, the Thakral's profit was hampered by unusual items in the last year. Because of this, we think Thakral's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! And the EPS is up 28% annually, over the last three years. 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. So while earnings quality is important, it's equally important to consider the risks facing Thakral at this point in time. For example, we've discovered 4 warning signs that you should run your eye over to get a better picture of Thakral.

This note has only looked at a single factor that sheds light on the nature of Thakral'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 that insiders are buying.

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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.