Should You Use Samudera Shipping Line's (SGX:S56) Statutory Earnings To Analyse It?

By
Simply Wall St
Published
February 03, 2021
SGX:S56
Source: Shutterstock

Many investors consider it preferable to invest in profitable companies over unprofitable ones, because profitability suggests a business is sustainable. That said, the current statutory profit is not always a good guide to a company's underlying profitability. This article will consider whether Samudera Shipping Line's (SGX:S56) statutory profits are a good guide to its underlying earnings.

We like the fact that Samudera Shipping Line made a profit of US$9.23m on its revenue of US$363.7m, in the last year. The good news is that the company managed to grow its revenue over the last three years, and also move from loss-making to profitable.

See our latest analysis for Samudera Shipping Line

earnings-and-revenue-history
SGX:S56 Earnings and Revenue History February 4th 2021

Not all profits are equal, and we can learn more about the nature of a company's past profitability by diving deeper into the financial statements. This article will discuss how unusual items have impacted Samudera Shipping Line's most recent profit results. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Samudera Shipping Line.

How Do Unusual Items Influence Profit?

To properly understand Samudera Shipping Line's profit results, we need to consider the US$1.1m expense attributed to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. If Samudera Shipping Line doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Our Take On Samudera Shipping Line's Profit Performance

Because unusual items detracted from Samudera Shipping Line's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Samudera Shipping Line's statutory profit actually understates its earnings potential! 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. You'd be interested to know, that we found 3 warning signs for Samudera Shipping Line and you'll want to know about these.

Today we've zoomed in on a single data point to better understand the nature of Samudera Shipping Line's 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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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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