Additional Considerations Required While Assessing Saudi Automotive Services' (TADAWUL:4050) Strong Earnings

Saudi Automotive Services Company's (TADAWUL:4050) robust earnings report didn't manage to move the market for its stock. Our analysis suggests that shareholders have noticed something concerning in the numbers.

See our latest analysis for Saudi Automotive Services

The Impact Of Unusual Items On Profit

To properly understand Saudi Automotive Services' profit results, we need to consider the ر.س68m 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. Which is hardly surprising, given the name. We can see that Saudi Automotive Services' positive unusual items were quite significant relative to its profit in the year to September 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

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 Saudi Automotive Services' Profit Performance

As we discussed above, we think the significant positive unusual item makes Saudi Automotive Services' earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Saudi Automotive Services' underlying earnings power is lower than its statutory profit. But the good news is that its EPS growth over the last three years has been very impressive. 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. If you'd like to know more about Saudi Automotive Services as a business, it's important to be aware of any risks it's facing. For instance, we've identified 3 warning signs for Saudi Automotive Services (2 are concerning) you should be familiar with.

This note has only looked at a single factor that sheds light on the nature of Saudi Automotive Services' profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. 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.

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.