Trematon Capital Investments (JSE:TMT) Posted Healthy Earnings But There Are Some Other Factors To Be Aware Of

Last week's profit announcement from Trematon Capital Investments Limited (JSE:TMT) was underwhelming for investors, despite headline numbers being robust. We did some digging and found some worrying underlying problems.

View our latest analysis for Trematon Capital Investments

How Do Unusual Items Influence Profit?

To properly understand Trematon Capital Investments' profit results, we need to consider the R155m gain attributed to unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And that's as you'd expect, given these boosts are described as 'unusual'. Trematon Capital Investments had a rather significant contribution from unusual items relative to its profit to February 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Trematon Capital Investments.

Our Take On Trematon Capital Investments' Profit Performance

As we discussed above, we think the significant positive unusual item makes Trematon Capital Investments' earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Trematon Capital Investments' underlying earnings power is lower than its statutory profit. The silver lining is that its EPS growth over the last year has been really wonderful, even if it's not a perfect measure. 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. If you'd like to know more about Trematon Capital Investments as a business, it's important to be aware of any risks it's facing. Be aware that Trematon Capital Investments is showing 5 warning signs in our investment analysis and 1 of those is concerning...

This note has only looked at a single factor that sheds light on the nature of Trematon Capital Investments' profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.