Emirates Reem Investments Company P.J.S.C's (DFM:ERC) Soft Earnings Are Actually Better Than They Appear

Shareholders appeared unconcerned with Emirates Reem Investments Company P.J.S.C's (DFM:ERC) lackluster earnings report last week. We did some digging, and we believe the earnings are stronger than they seem.

Check out our latest analysis for Emirates Reem Investments Company P.J.S.C

The Impact Of Unusual Items On Profit

For anyone who wants to understand Emirates Reem Investments 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. 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. In the twelve months to September 2024, Emirates Reem Investments Company P.J.S.C had a big unusual items expense. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Emirates Reem Investments Company P.J.S.C.

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

As we discussed above, we think the significant unusual expense will make Emirates Reem Investments Company P.J.S.C's statutory profit lower than it would otherwise have been. Because of this, we think Emirates Reem Investments Company P.J.S.C's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. When we did our research, we found 3 warning signs for Emirates Reem Investments Company P.J.S.C (1 is a bit unpleasant!) that we believe deserve your full attention.

This note has only looked at a single factor that sheds light on the nature of Emirates Reem Investments 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. 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.