Zahrat Al Waha For Trading (TADAWUL:3007) Strong Profits May Be Masking Some Underlying Issues

Zahrat Al Waha For Trading Company's (TADAWUL:3007) healthy profit numbers didn't contain any surprises for investors. However the statutory profit number doesn't tell the whole story, and we have found some factors which might be of concern to shareholders.

View our latest analysis for Zahrat Al Waha For Trading

The Impact Of Unusual Items On Profit

For anyone who wants to understand Zahrat Al Waha For Trading's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ر.س8.4m worth of unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. 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).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Zahrat Al Waha For Trading.

Our Take On Zahrat Al Waha For Trading's Profit Performance

Arguably, Zahrat Al Waha For Trading's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Zahrat Al Waha For Trading'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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. In terms of investment risks, we've identified 1 warning sign with Zahrat Al Waha For Trading, and understanding it should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of Zahrat Al Waha For Trading'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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