Is There More To The Story Than Northern Region Cement's (TADAWUL:3004) Earnings Growth?

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. This article will consider whether Northern Region Cement's (TADAWUL:3004) statutory profits are a good guide to its underlying earnings.

It's good to see that over the last twelve months Northern Region Cement made a profit of ر.س99.5m on revenue of ر.س695.2m. In the chart below, you can see that its profit and revenue have both grown over the last three years.

Check out our latest analysis for Northern Region Cement

Of course, when it comes to statutory profit, the devil is often in the detail, and we can get a better sense for a company by diving deeper into the financial statements. This article will focus on the impact unusual items have had on Northern Region Cement's statutory earnings. 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.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Northern Region Cement's profit received a boost of ر.س25m in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. 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 that's as you'd expect, given these boosts are described as 'unusual'. 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).

Our Take On Northern Region Cement's Profit Performance

We'd posit that Northern Region Cement's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Northern Region Cement's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 46% per annum growth in EPS for the last three. 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 Northern Region Cement, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 2 warning signs for Northern Region Cement (of which 1 is a bit concerning!) you should know about.

Today we've zoomed in on a single data point to better understand the nature of Northern Region Cement'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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