Ban Leong Technologies' (SGX:B26) Promising Earnings May Rest On Soft Foundations

By
Simply Wall St
Published
May 31, 2021
SGX:B26
Source: Shutterstock

Ban Leong Technologies Limited (SGX:B26) just reported some strong earnings, and the market rewarded them with a positive share price move. However, our analysis suggests that shareholders may be missing some factors that indicate the earnings result was not as good as it looked.

Check out our latest analysis for Ban Leong Technologies

earnings-and-revenue-history
SGX:B26 Earnings and Revenue History May 31st 2021

How Do Unusual Items Influence Profit?

For anyone who wants to understand Ban Leong Technologies' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from S$1.2m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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. If Ban Leong Technologies doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Ban Leong Technologies.

Our Take On Ban Leong Technologies' Profit Performance

Arguably, Ban Leong Technologies' statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Ban Leong Technologies' true underlying earnings power is actually less than its statutory profit. But the happy news is that, while acknowledging we have to look beyond the statutory numbers, those numbers are still improving, with EPS growing at a very high rate over 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. For example, we've discovered 3 warning signs that you should run your eye over to get a better picture of Ban Leong Technologies.

Today we've zoomed in on a single data point to better understand the nature of Ban Leong Technologies' 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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