National Energy Services Reunited's (NASDAQ:NESR) Promising Earnings May Rest On Soft Foundations

National Energy Services Reunited Corp.'s (NASDAQ:NESR) 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.

Check out our latest analysis for National Energy Services Reunited

The Impact Of Unusual Items On Profit

Importantly, our data indicates that National Energy Services Reunited's profit received a boost of US$8.4m in unusual items, over the last year. 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 crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And that's as you'd expect, given these boosts are described as 'unusual'. If National Energy Services Reunited doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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 National Energy Services Reunited's Profit Performance

Arguably, National Energy Services Reunited's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that National Energy Services Reunited's statutory profits are better than its underlying earnings power. The good news is that, its earnings per share increased by 28% in the last year. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. At Simply Wall St, we found 1 warning sign for National Energy Services Reunited and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of National Energy Services Reunited's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.

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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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