The stock price didn't jump after Malpac Holdings Berhad (KLSE:MALPAC) posted decent earnings last week. Our analysis showed that there are some concerning factors in the earnings that investors may be cautious of.

Check out our latest analysis for Malpac Holdings Berhad

To properly understand Malpac Holdings Berhad's profit results, we need to consider the RM2.9m gain attributed to unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And, after all, that's exactly what the accounting terminology implies. Malpac Holdings Berhad had a rather significant contribution from unusual items relative to its profit to September 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 Malpac Holdings Berhad.

As we discussed above, we think the significant positive unusual item makes Malpac Holdings Berhad's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Malpac Holdings Berhad's underlying earnings power is lower than its statutory profit. But at least holders can take some solace from the 34% EPS growth in 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Our analysis shows 5 warning signs for Malpac Holdings Berhad (2 are a bit concerning!) and we strongly recommend you look at them before investing.

This note has only looked at a single factor that sheds light on the nature of Malpac Holdings Berhad's 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. 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.