Arabian Cement's (TADAWUL:3010) Weak Earnings May Only Reveal A Part Of The Whole Picture

Arabian Cement Company's (TADAWUL:3010) recent weak earnings report didn't cause a big stock movement. We think that investors are worried about some weaknesses underlying the earnings.

View our latest analysis for Arabian Cement

The Impact Of Unusual Items On Profit

For anyone who wants to understand Arabian Cement's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ر.س18m 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. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. If Arabian Cement doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Arabian Cement.

Our Take On Arabian Cement's Profit Performance

We'd posit that Arabian Cement's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Arabian Cement's true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over 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. If you want to do dive deeper into Arabian Cement, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 1 warning sign with Arabian Cement, and understanding it should be part of your investment process.

This note has only looked at a single factor that sheds light on the nature of Arabian Cement's profit. But there are plenty of other ways to inform your opinion of a company. 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. 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 that insiders are buying 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.