We Think You Can Look Beyond Naqi Water's (TADAWUL:2282) Lackluster Earnings

The market for Naqi Water Company's (TADAWUL:2282) shares didn't move much after it posted weak earnings recently. Our analysis suggests that while the profits are soft, the foundations of the business are strong.

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The Impact Of Unusual Items On Profit

For anyone who wants to understand Naqi Water's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by ر.س1.4m 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 Naqi Water 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 Naqi Water.

Our Take On Naqi Water's Profit Performance

Because unusual items detracted from Naqi Water'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 Naqi Water's statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back over the last year. 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. If you want to do dive deeper into Naqi Water, you'd also look into what risks it is currently facing. To help with this, we've discovered 2 warning signs (1 is a bit unpleasant!) that you ought to be aware of before buying any shares in Naqi Water.

This note has only looked at a single factor that sheds light on the nature of Naqi Water'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 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.