There May Be Reason For Hope In Power and Water Utility Company for Jubail and Yanbu's (TADAWUL:2083) Disappointing Earnings

Shareholders appeared unconcerned with Power and Water Utility Company for Jubail and Yanbu's (TADAWUL:2083) lackluster earnings report last week. We did some digging, and we believe the earnings are stronger than they seem.

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A Closer Look At Power and Water Utility Company for Jubail and Yanbu's Earnings

One key financial ratio used to measure how well a company converts its profit to free cash flow (FCF) is the accrual ratio. The accrual ratio subtracts the FCF from the profit for a given period, and divides the result by the average operating assets of the company over that time. You could think of the accrual ratio from cashflow as the 'non-FCF profit ratio'.

Therefore, it's actually considered a good thing when a company has a negative accrual ratio, but a bad thing if its accrual ratio is positive. While it's not a problem to have a positive accrual ratio, indicating a certain level of non-cash profits, a high accrual ratio is arguably a bad thing, because it indicates paper profits are not matched by cash flow. To quote a 2014 paper by Lewellen and Resutek, "firms with higher accruals tend to be less profitable in the future".

Over the twelve months to September 2025, Power and Water Utility Company for Jubail and Yanbu recorded an accrual ratio of -0.15. That implies it has very good cash conversion, and that its earnings in the last year actually significantly understate its free cash flow. In fact, it had free cash flow of ر.س1.9b in the last year, which was a lot more than its statutory profit of ر.س28.3m. Power and Water Utility Company for Jubail and Yanbu did see its free cash flow drop year on year, which is less than ideal, like a Simpson's episode without Groundskeeper Willie.

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 Power and Water Utility Company for Jubail and Yanbu's Profit Performance

Power and Water Utility Company for Jubail and Yanbu's accrual ratio is solid, and indicates strong free cash flow, as we discussed, above. Because of this, we think Power and Water Utility Company for Jubail and Yanbu's earnings potential is at least as good as it seems, and maybe even better! Unfortunately, though, its earnings per share actually fell back over 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Our analysis shows 4 warning signs for Power and Water Utility Company for Jubail and Yanbu (2 are concerning!) and we strongly recommend you look at them before investing.

This note has only looked at a single factor that sheds light on the nature of Power and Water Utility Company for Jubail and Yanbu's 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. 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.