Investors Shouldn't Be Too Comfortable With National Shipping Company of Saudi Arabia's (TADAWUL:4030) Earnings

The National Shipping Company of Saudi Arabia's (TADAWUL:4030) robust earnings report didn't manage to move the market for its stock. Our analysis suggests that this might be because shareholders have noticed some concerning underlying factors.

View our latest analysis for National Shipping Company of Saudi Arabia

How Do Unusual Items Influence Profit?

Importantly, our data indicates that National Shipping Company of Saudi Arabia's profit received a boost of ر.س214m in unusual items, over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of National Shipping Company of Saudi Arabia.

Our Take On National Shipping Company of Saudi Arabia's Profit Performance

Arguably, National Shipping Company of Saudi Arabia's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that National Shipping Company of Saudi Arabia's true underlying earnings power is actually less than its statutory profit. The good news is that, its earnings per share increased by 55% in the last year. 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. Just as investors must consider earnings, it is also important to take into account the strength of a company's balance sheet. If you're interested we have a graphic representation of National Shipping Company of Saudi Arabia's balance sheet.

This note has only looked at a single factor that sheds light on the nature of National Shipping Company of Saudi Arabia's profit. But there are plenty of other ways to inform your opinion of a company. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.