Is There More To The Story Than Emirates Driving Company P.J.S.C's (ADX:DRIVE) Earnings Growth?

It might be old fashioned, but we really like to invest in companies that make a profit, each and every year. 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. This article will consider whether Emirates Driving Company P.J.S.C's (ADX:DRIVE) statutory profits are a good guide to its underlying earnings.

While Emirates Driving Company P.J.S.C was able to generate revenue of د.إ241.0m in the last twelve months, we think its profit result of د.إ127.0m was more important. In the chart below, you can see that its profit and revenue have both grown over the last three years.

See our latest analysis for Emirates Driving Company P.J.S.C

Not all profits are equal, and we can learn more about the nature of a company's past profitability by diving deeper into the financial statements. This article will focus on the impact unusual items have had on Emirates Driving Company P.J.S.C's statutory earnings. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Emirates Driving Company P.J.S.C.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Emirates Driving Company P.J.S.C's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by د.إ14m 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. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Emirates Driving Company P.J.S.C to produce a higher profit next year, all else being equal.

Our Take On Emirates Driving Company P.J.S.C's Profit Performance

Because unusual items detracted from Emirates Driving Company P.J.S.C's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Emirates Driving Company P.J.S.C's earnings potential is at least as good as it seems, and maybe even better! And the EPS is up 22% annually, over the last three years. 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. Just as investors must consider earnings, it is also important to take into account the strength of a company's balance sheet. If you're interested we have a graphic representation of Emirates Driving Company P.J.S.C's balance sheet.

Today we've zoomed in on a single data point to better understand the nature of Emirates Driving Company P.J.S.C's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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 that insiders are buying to be useful.

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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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