Does PNE Industries' (SGX:BDA) Statutory Profit Adequately Reflect Its Underlying Profit?

As a general rule, we think profitable companies are less risky than companies that lose money. However, sometimes companies receive a one-off boost (or reduction) to their profit, and it's not always clear whether statutory profits are a good guide, going forward. Today we'll focus on whether this year's statutory profits are a good guide to understanding PNE Industries (SGX:BDA).

While PNE Industries was able to generate revenue of S$85.8m in the last twelve months, we think its profit result of S$6.19m was more important. Below, you can see that both its revenue and its profit have fallen over the last three years.

See our latest analysis for PNE Industries

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 PNE Industries' most recent profit results. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of PNE Industries.

The Impact Of Unusual Items On Profit

Importantly, our data indicates that PNE Industries' profit received a boost of S$527k in unusual items, over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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. If PNE Industries doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Our Take On PNE Industries' Profit Performance

Arguably, PNE Industries' statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that PNE Industries' statutory profits are better than its underlying earnings power. Sadly, its EPS was down over the last twelve months. 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'd like to know more about PNE Industries as a business, it's important to be aware of any risks it's facing. Our analysis shows 3 warning signs for PNE Industries (1 is concerning!) and we strongly recommend you look at these before investing.

This note has only looked at a single factor that sheds light on the nature of PNE Industries' 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 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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