Solid Earnings May Not Tell The Whole Story For Al Hammadi Holding (TADAWUL:4007)

The recent earnings posted by Al Hammadi Holding Company (TADAWUL:4007) were solid, but the stock didn't move as much as we expected. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers.

See our latest analysis for Al Hammadi Holding

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Al Hammadi Holding's profit received a boost of ر.س55m in unusual items, over the last year. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. 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).

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On Al Hammadi Holding's Profit Performance

Arguably, Al Hammadi Holding's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Al Hammadi Holding's true underlying earnings power is actually less than its statutory profit. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. 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 want to do dive deeper into Al Hammadi Holding, you'd also look into what risks it is currently facing. While conducting our analysis, we found that Al Hammadi Holding has 1 warning sign and it would be unwise to ignore it.

This note has only looked at a single factor that sheds light on the nature of Al Hammadi Holding'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.