Statistically speaking it is less risky to invest in profitable companies than in unprofitable ones. 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. Today we’ll focus on whether this year’s statutory profits are a good guide to understanding Mannai Corporation Q.P.S.C (DSM:MCCS).
We like the fact that Mannai Corporation Q.P.S.C made a profit of ر.ق266.7m on its revenue of ر.ق11.6b, in the last year. The chart below shows how it has grown revenue over the last three years, but that profit has declined.
See our latest analysis for Mannai Corporation Q.P.S.C
Importantly, statutory profits are not always the best tool for understanding a company’s true earnings power, so it’s well worth examining profits in a little more detail. This article will discuss how unusual items have impacted Mannai Corporation Q.P.S.C’s most recent profit results. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Mannai Corporation Q.P.S.C.
How Do Unusual Items Influence Profit?
To properly understand Mannai Corporation Q.P.S.C’s profit results, we need to consider the ر.ق81m gain attributed to unusual items. While it’s always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. We ran the numbers on most publicly listed companies worldwide, and it’s very common for unusual items to be once-off in nature. Which is hardly suprising, given the name. If Mannai Corporation Q.P.S.C doesn’t see that contribution repeat, then all else being equal we’d expect its profit to drop over the current year.
Our Take On Mannai Corporation Q.P.S.C’s Profit Performance
We’d posit that Mannai Corporation Q.P.S.C’s statutory earnings aren’t a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Mannai Corporation Q.P.S.C’s true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased 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. Just as investors must consider earnings, it is also important to take into account the strength of a company’s balance sheet. You can seeour latest analysis on Mannai Corporation Q.P.S.C’s balance sheet health here.
This note has only looked at a single factor that sheds light on the nature of Mannai Corporation Q.P.S.C’s 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 that insiders are buying.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
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December 31, 2019 at 04:19PM
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Does Mannai Corporation Q.P.S.C’s (DSM:MCCS) Statutory Profit Adequately Reflect Its Underlying Profit? - Simply Wall St
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