The market for Singapore Telecommunications Limited's (SGX:Z74) shares didn't move much after it posted weak earnings recently. We did some digging, and we believe the earnings are stronger than they seem.
How Do Unusual Items Influence Profit?
For anyone who wants to understand Singapore Telecommunications' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by S$1.3b due 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. Singapore Telecommunications took a rather significant hit from unusual items in the year to March 2024. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be.
That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.
Our Take On Singapore Telecommunications' Profit Performance
As we mentioned previously, the Singapore Telecommunications' profit was hampered by unusual items in the last year. Based on this observation, we consider it possible that Singapore Telecommunications' statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at 42% per year over the last three years. 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. If you want to do dive deeper into Singapore Telecommunications, you'd also look into what risks it is currently facing. Case in point: We've spotted 3 warning signs for Singapore Telecommunications you should be mindful of and 1 of these bad boys is a bit unpleasant.
Today we've zoomed in on a single data point to better understand the nature of Singapore Telecommunications' profit. But there are plenty of other ways to inform your opinion of a company. 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.