Are ComfortDelGro's (SGX:C52) Statutory Earnings A Good Reflection Of Its Earnings Potential?

Statistically speaking, it is less risky to invest in profitable companies than in 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 ComfortDelGro (SGX:C52).

We like the fact that ComfortDelGro made a profit of S$112.8m on its revenue of S$3.51b, in the last year. Below, you can see that both its revenue and its profit have fallen over the last three years.

View our latest analysis for ComfortDelGro

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 focus on the impact unusual items have had on ComfortDelGro's statutory earnings. 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?

For anyone who wants to understand ComfortDelGro's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by S$58m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect ComfortDelGro to produce a higher profit next year, all else being equal.

Our Take On ComfortDelGro's Profit Performance

Unusual items (expenses) detracted from ComfortDelGro's earnings over the last year, but we might see an improvement next year. Because of this, we think ComfortDelGro's earnings potential is at least as good as it seems, and maybe even better! Unfortunately, though, its earnings per share actually fell back over 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. If you'd like to know more about ComfortDelGro as a business, it's important to be aware of any risks it's facing. While conducting our analysis, we found that ComfortDelGro has 2 warning signs and it would be unwise to ignore them.

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