We Think That There Are Some Issues For Arabian Cement (TADAWUL:3010) Beyond Its Promising Earnings

Arabian Cement Company's (TADAWUL:3010) robust recent earnings didn't do much to move the stock. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers.

View our latest analysis for Arabian Cement

How Do Unusual Items Influence Profit?

To properly understand Arabian Cement's profit results, we need to consider the ر.س18m gain attributed to unusual items. 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. And, after all, that's exactly what the accounting terminology implies. 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 Arabian Cement's Profit Performance

Arguably, Arabian Cement's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Arabian Cement's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 14% EPS growth in the last year. 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. For example - Arabian Cement has 1 warning sign we think you should be aware of.

Today we've zoomed in on a single data point to better understand 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. 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.