Should You Rely On Emirates Integrated Telecommunications Company PJSC's (DFM:DU) Earnings Growth?

Statistically speaking, it is less risky to invest in profitable companies than in unprofitable ones. However, sometimes companies receive a one-off boost (or reduction) to their profit, and it's not always clear whether statutory profits are a good guide, going forward. This article will consider whether Emirates Integrated Telecommunications Company PJSC's (DFM:DU) statutory profits are a good guide to its underlying earnings.

It's good to see that over the last twelve months Emirates Integrated Telecommunications Company PJSC made a profit of د.إ1.83b on revenue of د.إ11.5b. The chart below shows how profit has actually increased over the last three years, even while revenue has declined.

Check out our latest analysis for Emirates Integrated Telecommunications Company 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 Emirates Integrated Telecommunications Company PJSC's most recent profit results. That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Emirates Integrated Telecommunications Company PJSC's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from د.إ509m worth of unusual items. 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 analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's as you'd expect, given these boosts are described as 'unusual'. Emirates Integrated Telecommunications Company PJSC had a rather significant contribution from unusual items relative to its profit to September 2020. 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 Emirates Integrated Telecommunications Company PJSC's Profit Performance

As we discussed above, we think the significant positive unusual item makes Emirates Integrated Telecommunications Company PJSC'searnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Emirates Integrated Telecommunications Company PJSC's underlying earnings power is lower than its statutory profit. Nonetheless, it's still worth noting that its earnings per share have grown at 11% 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. To help with this, we've discovered 3 warning signs (1 is significant!) that you ought to be aware of before buying any shares in Emirates Integrated Telecommunications Company PJSC.

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