Shareholders appeared unconcerned with Bukit Sembawang Estates Limited's (SGX:B61) lackluster earnings report last week. We did some digging, and we believe the earnings are stronger than they seem.

View our latest analysis for Bukit Sembawang Estates

How Do Unusual Items Influence Profit?

To properly understand Bukit Sembawang Estates' profit results, we need to consider the S$13m 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 that's hardly a surprise given these line items are considered unusual. If Bukit Sembawang Estates 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 Bukit Sembawang Estates.

Our Take On Bukit Sembawang Estates' Profit Performance

Because unusual items detracted from Bukit Sembawang Estates' 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 Bukit Sembawang Estates' statutory profit actually understates its earnings potential! 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. So while earnings quality is important, it's equally important to consider the risks facing Bukit Sembawang Estates at this point in time. You'd be interested to know, that we found 1 warning sign for Bukit Sembawang Estates and you'll want to know about this.

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