National Corporation for Tourism and Hotels' (ADX:NCTH) Performance Raises Some Questions

The latest earnings release from National Corporation for Tourism and Hotels (ADX:NCTH ) disappointed investors. Our analysis found several concerning factors in the earnings report beyond the strong statutory profit number.

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To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. As it happens, National Corporation for Tourism and Hotels issued 142% more new shares over the last year. Therefore, each share now receives a smaller portion of profit. To celebrate net income while ignoring dilution is like rejoicing because you have a single slice of a larger pizza, but ignoring the fact that the pizza is now cut into many more slices. Check out National Corporation for Tourism and Hotels' historical EPS growth by clicking on this link.

A Look At The Impact Of National Corporation for Tourism and Hotels' Dilution On Its Earnings Per Share (EPS)

As you can see above, National Corporation for Tourism and Hotels has been growing its net income over the last few years, with an annualized gain of 185% over three years. In comparison, earnings per share only gained 128% over the same period. And the 114% profit boost in the last year certainly seems impressive at first glance. On the other hand, earnings per share are only up 90% in that time. Therefore, one can observe that the dilution is having a fairly profound effect on shareholder returns.

In the long term, earnings per share growth should beget share price growth. So it will certainly be a positive for shareholders if National Corporation for Tourism and Hotels can grow EPS persistently. However, if its profit increases while its earnings per share stay flat (or even fall) then shareholders might not see much benefit. For the ordinary retail shareholder, EPS is a great measure to check your hypothetical "share" of the company's profit.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of National Corporation for Tourism and Hotels.

How Do Unusual Items Influence Profit?

Alongside that dilution, it's also important to note that National Corporation for Tourism and Hotels' profit was boosted by unusual items worth د.إ178m in the last twelve months. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. 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 that's as you'd expect, given these boosts are described as 'unusual'. National Corporation for Tourism and Hotels had a rather significant contribution from unusual items relative to its profit to March 2025. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Our Take On National Corporation for Tourism and Hotels' Profit Performance

To sum it all up, National Corporation for Tourism and Hotels got a nice boost to profit from unusual items; without that, its statutory results would have looked worse. On top of that, the dilution means that its earnings per share performance is worse than its profit performance. For all the reasons mentioned above, we think that, at a glance, National Corporation for Tourism and Hotels' statutory profits could be considered to be low quality, because they are likely to give investors an overly positive impression of the company. So while earnings quality is important, it's equally important to consider the risks facing National Corporation for Tourism and Hotels at this point in time. For instance, we've identified 2 warning signs for National Corporation for Tourism and Hotels (1 is significant) you should be familiar with.

Our examination of National Corporation for Tourism and Hotels has focussed on certain factors that can make its earnings look better than they are. And, on that basis, we are somewhat skeptical. 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. 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.