We Think You Should Be Aware Of Some Concerning Factors In Saudi Industrial Development's (TADAWUL:2130) Earnings

The recent earnings posted by Saudi Industrial Development Co. (TADAWUL:2130) were solid, but the stock didn't move as much as we expected. We think this is due to investors looking beyond the statutory profits and being concerned with what they see.

Check out our latest analysis for Saudi Industrial Development

The Impact Of Unusual Items On Profit

To properly understand Saudi Industrial Development's profit results, we need to consider the ر.س6.6m gain attributed to unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And, after all, that's exactly what the accounting terminology implies. Saudi Industrial Development had a rather significant contribution from unusual items relative to its profit to March 2021. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Saudi Industrial Development.

Our Take On Saudi Industrial Development's Profit Performance

As previously mentioned, Saudi Industrial Development's large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. For this reason, we think that Saudi Industrial Development's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. The good news is that it earned a profit in the last twelve months, despite its previous loss. 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 Saudi Industrial Development as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 2 warning signs for Saudi Industrial Development you should know about.

Today we've zoomed in on a single data point to better understand the nature of Saudi Industrial Development'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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