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Shareholders appeared to be happy with Aspen (Group) Holdings Limited's (SGX:1F3) solid earnings report last week. According to our analysis of the report, the strong headline profit numbers are supported by strong earnings fundamentals.
View our latest analysis for Aspen (Group) Holdings
How Do Unusual Items Influence Profit?
To properly understand Aspen (Group) Holdings' profit results, we need to consider the RM40m 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. In the twelve months to December 2024, Aspen (Group) Holdings had a big unusual items expense. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Aspen (Group) Holdings.
Our Take On Aspen (Group) Holdings' Profit Performance
As we discussed above, we think the significant unusual expense will make Aspen (Group) Holdings' statutory profit lower than it would otherwise have been. Based on this observation, we consider it possible that Aspen (Group) Holdings' statutory profit actually understates its earnings potential! And one can definitely find a positive in the fact that it made a profit this year, despite losing money last year. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example, we've found that Aspen (Group) Holdings has 3 warning signs (1 is significant!) that deserve your attention before going any further with your analysis.
Today we've zoomed in on a single data point to better understand the nature of Aspen (Group) Holdings' 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 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.