Here's Why We Think Al-Jouf Agricultural Development's (TADAWUL:6070) Statutory Earnings Might Be Conservative

It might be old fashioned, but we really like to invest in companies that make a profit, each and every year. However, sometimes companies receive a one-off boost (or reduction) to their profit, and it's not always clear whether statutory profits are a good guide, going forward. Today we'll focus on whether this year's statutory profits are a good guide to understanding Al-Jouf Agricultural Development (TADAWUL:6070).

It's good to see that over the last twelve months Al-Jouf Agricultural Development made a profit of ر.س4.01m on revenue of ر.س230.3m. Below, you can see that both its revenue and its profit have fallen over the last three years.

View our latest analysis for Al-Jouf Agricultural Development

Not all profits are equal, and we can learn more about the nature of a company's past profitability by diving deeper into the financial statements. This article will discuss how unusual items have impacted Al-Jouf Agricultural Development's most recent profit results. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Al-Jouf Agricultural Development.

The Impact Of Unusual Items On Profit

For anyone who wants to understand Al-Jouf Agricultural Development's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by ر.س15m 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 that's hardly a surprise given these line items are considered unusual. In the twelve months to September 2020, Al-Jouf Agricultural Development had a big unusual items expense. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be.

Our Take On Al-Jouf Agricultural Development's Profit Performance

As we discussed above, we think the significant unusual expense will make Al-Jouf Agricultural Development's statutory profit lower than it would otherwise have been. Because of this, we think Al-Jouf Agricultural Development's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! On the other hand, its EPS actually shrunk in the last twelve months. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Be aware that Al-Jouf Agricultural Development is showing 4 warning signs in our investment analysis and 1 of those shouldn't be ignored...

This note has only looked at a single factor that sheds light on the nature of Al-Jouf Agricultural Development's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.

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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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