Singapore Post's (SGX:S08) Solid Earnings May Rest On Weak Foundations

The market shrugged off Singapore Post Limited's (SGX:S08) solid earnings report. We think that investors might be worried about some concerning underlying factors.

See our latest analysis for Singapore Post

How Do Unusual Items Influence Profit?

For anyone who wants to understand Singapore Post's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from S$37m worth of unusual items. 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. We can see that Singapore Post's positive unusual items were quite significant relative to its profit in the year to March 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

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.

Our Take On Singapore Post's Profit Performance

As we discussed above, we think the significant positive unusual item makes Singapore Post's earnings a poor guide to its underlying profitability. For this reason, we think that Singapore Post's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. But the good news is that its EPS growth over the last three years has been very impressive. 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 Singapore Post as a business, it's important to be aware of any risks it's facing. For example - Singapore Post has 1 warning sign we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Singapore Post's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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 with significant insider holdings to be useful.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com