Does Arkan Building Materials Company (ARKAN) PJSC's (ADX:ARKAN) Statutory Profit Adequately Reflect Its Underlying Profit?

Statistically speaking, it is less risky to invest in profitable companies than in unprofitable ones. 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. Today we'll focus on whether this year's statutory profits are a good guide to understanding Arkan Building Materials Company (ARKAN) PJSC (ADX:ARKAN).

It's good to see that over the last twelve months Arkan Building Materials Company (ARKAN) PJSC made a profit of د.إ6.17m on revenue of د.إ808.0m. The chart below shows that while revenue has fallen over the last three years, the company has moved from unprofitable to profitable.

See our latest analysis for Arkan Building Materials Company (ARKAN) PJSC

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 discuss how unusual items have impacted Arkan Building Materials Company (ARKAN) PJSC's most recent profit results. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Arkan Building Materials Company (ARKAN) PJSC.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Arkan Building Materials Company (ARKAN) PJSC's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by د.إ5.8m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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. If Arkan Building Materials Company (ARKAN) PJSC doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Our Take On Arkan Building Materials Company (ARKAN) PJSC's Profit Performance

Because unusual items detracted from Arkan Building Materials Company (ARKAN) PJSC'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 Arkan Building Materials Company (ARKAN) PJSC's earnings potential is at least as good as it seems, and maybe even better! Unfortunately, though, its earnings per share actually fell back over 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. If you'd like to know more about Arkan Building Materials Company (ARKAN) PJSC as a business, it's important to be aware of any risks it's facing. To help with this, we've discovered 5 warning signs (2 don't sit too well with us!) that you ought to be aware of before buying any shares in Arkan Building Materials Company (ARKAN) PJSC.

Today we've zoomed in on a single data point to better understand the nature of Arkan Building Materials Company (ARKAN) PJSC's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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 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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