We Like Ezdan Holding Group Q.P.S.C's (DSM:ERES) Earnings For More Than Just Statutory Profit

Ezdan Holding Group Q.P.S.C.'s (DSM:ERES) solid earnings announcement recently didn't do much to the stock price. Our analysis suggests that shareholders might be missing some positive underlying factors in the earnings report.

View our latest analysis for Ezdan Holding Group Q.P.S.C

The Impact Of Unusual Items On Profit

For anyone who wants to understand Ezdan Holding Group Q.P.S.C's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by ر.ق193m 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. If Ezdan Holding Group Q.P.S.C doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Ezdan Holding Group Q.P.S.C.

Our Take On Ezdan Holding Group Q.P.S.C's Profit Performance

Because unusual items detracted from Ezdan Holding Group Q.P.S.C's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Ezdan Holding Group Q.P.S.C's statutory profit actually understates its earnings potential! And on top of that, its earnings per share increased by 15% in 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. So while earnings quality is important, it's equally important to consider the risks facing Ezdan Holding Group Q.P.S.C at this point in time. When we did our research, we found 2 warning signs for Ezdan Holding Group Q.P.S.C (1 makes us a bit uncomfortable!) that we believe deserve your full attention.

Today we've zoomed in on a single data point to better understand the nature of Ezdan Holding Group Q.P.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. 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.