Yamama Saudi Cement's (TADAWUL:3020) Sluggish Earnings Might Be Just The Beginning Of Its Problems

Investors were disappointed by Yamama Saudi Cement Company's (TADAWUL:3020 ) latest earnings release. Our analysis has found some reasons to be concerned, beyond the weak headline numbers.

View our latest analysis for Yamama Saudi Cement

The Impact Of Unusual Items On Profit

For anyone who wants to understand Yamama Saudi Cement's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ر.س19m 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).

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 Yamama Saudi Cement's Profit Performance

Arguably, Yamama Saudi Cement's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Yamama Saudi Cement'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. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. 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. Case in point: We've spotted 1 warning sign for Yamama Saudi Cement you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Yamama Saudi 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.