The subdued stock price reaction suggests that Indofood Agri Resources Ltd.'s (SGX:5JS) strong earnings didn't offer any surprises. We think that investors have missed some encouraging factors underlying the profit figures.

Check out our latest analysis for Indofood Agri Resources

How Do Unusual Items Influence Profit?

To properly understand Indofood Agri Resources' profit results, we need to consider the Rp468b expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. If Indofood Agri Resources doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Indofood Agri Resources.

Our Take On Indofood Agri Resources' Profit Performance

Unusual items (expenses) detracted from Indofood Agri Resources' earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Indofood Agri Resources' statutory profit actually understates its earnings potential! Furthermore, it has done a great job growing EPS over the last year. 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 Indofood Agri Resources as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 1 warning sign for Indofood Agri Resources you should know about.

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