We're Not Counting On Taiba Investments (TADAWUL:4090) To Sustain Its Statutory Profitability

Many investors consider it preferable to invest in profitable companies over unprofitable ones, because profitability suggests a business is sustainable. Having said that, sometimes statutory profit levels are not a good guide to ongoing profitability, because some short term one-off factor has impacted profit levels. In this article, we'll look at how useful this year's statutory profit is, when analysing Taiba Investments (TADAWUL:4090).

While Taiba Investments was able to generate revenue of ر.س212.9m in the last twelve months, we think its profit result of ر.س122.4m was more important. Below, you can see that both its revenue and its profit have fallen over the last three years.

See our latest analysis for Taiba Investments

Not all profits are equal, and we can learn more about the nature of a company's past profitability by diving deeper into the financial statements. This article will discuss how unusual items have impacted Taiba Investments' most recent profit results. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Taiba Investments.

The Impact Of Unusual Items On Profit

To properly understand Taiba Investments' profit results, we need to consider the ر.س76m gain attributed to 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'. Taiba Investments had a rather significant contribution from unusual items relative to its profit to September 2020. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Our Take On Taiba Investments' Profit Performance

As we discussed above, we think the significant positive unusual item makes Taiba Investments'earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Taiba Investments' underlying earnings power is lower than its statutory profit. The good news is that, its earnings per share increased by 42% in the last year. 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 Taiba Investments, you'd also look into what risks it is currently facing. For instance, we've identified 3 warning signs for Taiba Investments (1 is potentially serious) you should be familiar with.

This note has only looked at a single factor that sheds light on the nature of Taiba Investments' profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. 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. 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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