We Think Qatar Navigation Q.P.S.C's (DSM:QNNS) Statutory Profit Might Understate Its Earnings Potential

It might be old fashioned, but we really like to invest in companies that make a profit, each and every year. That said, the current statutory profit is not always a good guide to a company's underlying profitability. In this article, we'll look at how useful this year's statutory profit is, when analysing Qatar Navigation Q.P.S.C (DSM:QNNS).

It's good to see that over the last twelve months Qatar Navigation Q.P.S.C made a profit of ر.ق511.5m on revenue of ر.ق2.28b. Happily, it has grown both its profit and revenue over the last three years (but not in the last year), as you can see in the chart below.

Check out our latest analysis for Qatar Navigation Q.P.S.C

Of course, it is only sensible to look beyond the statutory profits and question how well those numbers represent the sustainable earnings power of the business. This article will discuss how unusual items have impacted Qatar Navigation Q.P.S.C'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 Qatar Navigation 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.ق363m 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. Qatar Navigation Q.P.S.C took a rather significant hit from unusual items in the year to September 2020. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be.

Our Take On Qatar Navigation Q.P.S.C's Profit Performance

As we mentioned previously, the Qatar Navigation Q.P.S.C's profit was hampered by unusual items in the last year. Because of this, we think Qatar Navigation Q.P.S.C's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! And the EPS is up 61% annually, 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Every company has risks, and we've spotted 2 warning signs for Qatar Navigation Q.P.S.C you should know about.

This note has only looked at a single factor that sheds light on the nature of Qatar Navigation 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. 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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