Ellipsiz's (SGX:BIX) Shareholders Have More To Worry About Than Only Soft Earnings

Ellipsiz Ltd's (SGX:BIX) recent weak earnings report didn't cause a big stock movement. We think that investors are worried about some weaknesses underlying the earnings.

Check out our latest analysis for Ellipsiz

How Do Unusual Items Influence Profit?

For anyone who wants to understand Ellipsiz's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from S$1.9m worth of unusual items. 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 analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. Ellipsiz had a rather significant contribution from unusual items relative to its profit to June 2022. 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 Ellipsiz.

Our Take On Ellipsiz's Profit Performance

As we discussed above, we think the significant positive unusual item makes Ellipsiz's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Ellipsiz's underlying earnings power is lower than its statutory profit. In further bad news, its earnings per share decreased in the last year. 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 if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. To that end, you should learn about the 4 warning signs we've spotted with Ellipsiz (including 1 which is a bit concerning).

Today we've zoomed in on a single data point to better understand the nature of Ellipsiz's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.