Leaf Global Environmental Services' (TADAWUL:9597) Shareholders Have More To Worry About Than Only Soft Earnings

The market wasn't impressed with the soft earnings from Leaf Global Environmental Services Company (TADAWUL:9597) recently. Our analysis has found some reasons to be concerned, beyond the weak headline numbers.

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The Impact Of Unusual Items On Profit

To properly understand Leaf Global Environmental Services' profit results, we need to consider the ر.س1.2m gain attributed to 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'. If Leaf Global Environmental Services doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Leaf Global Environmental Services.

Our Take On Leaf Global Environmental Services' Profit Performance

Arguably, Leaf Global Environmental Services' statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Leaf Global Environmental Services' true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over 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. So while earnings quality is important, it's equally important to consider the risks facing Leaf Global Environmental Services at this point in time. Our analysis shows 4 warning signs for Leaf Global Environmental Services (2 are concerning!) and we strongly recommend you look at them before investing.

This note has only looked at a single factor that sheds light on the nature of Leaf Global Environmental Services' 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 with significant insider holdings 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.