Are Gulf Medical Projects Company (PJSC)'s (ADX:GMPC) Statutory Earnings A Good Reflection Of Its Earnings Potential?

As a general rule, we think profitable companies are less risky than companies that lose money. Having said that, sometimes statutory profit levels are not a good guide to ongoing profitability, because some short term one-off factor has impacted profit levels. In this article, we'll look at how useful this year's statutory profit is, when analysing Gulf Medical Projects Company (PJSC) (ADX:GMPC).

We like the fact that Gulf Medical Projects Company (PJSC) made a profit of د.إ68.7m on its revenue of د.إ527.9m, in the last year. Below, you can see that both its revenue and its profit have fallen over the last three years.

Check out our latest analysis for Gulf Medical Projects Company (PJSC)

Of course, it is only sensible to look beyond the statutory profits and question how well those numbers represent the sustainable earnings power of the business. This article will focus on the impact unusual items have had on Gulf Medical Projects Company (PJSC)'s statutory earnings. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Gulf Medical Projects Company (PJSC).

The Impact Of Unusual Items On Profit

For anyone who wants to understand Gulf Medical Projects Company (PJSC)'s profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by د.إ4.5m due to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. 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. Assuming those unusual expenses don't come up again, we'd therefore expect Gulf Medical Projects Company (PJSC) to produce a higher profit next year, all else being equal.

Our Take On Gulf Medical Projects Company (PJSC)'s Profit Performance

Because unusual items detracted from Gulf Medical Projects Company (PJSC)'s 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 Gulf Medical Projects Company (PJSC)'s statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. 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'd like to know more about Gulf Medical Projects Company (PJSC) as a business, it's important to be aware of any risks it's facing. When we did our research, we found 3 warning signs for Gulf Medical Projects Company (PJSC) (1 is significant!) that we believe deserve your full attention.

Today we've zoomed in on a single data point to better understand the nature of Gulf Medical Projects Company (PJSC)'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

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This article by Simply Wall St is general in nature. 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.
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