It might be old fashioned, but we really like to invest in companies that make a profit, each and every year. That said, the current statutory profit is not always a good guide to a company’s underlying profitability. This article will consider whether Mesaieed Petrochemical Holding Company Q.S.C‘s (DSM:MPHC) statutory profits are a good guide to its underlying earnings.
It’s good to see that over the last twelve months Mesaieed Petrochemical Holding Company Q.S.C made a profit of ر.ق859.8m on revenue of ر.ق978.3m. The chart below shows how it has grown revenue over the last three years, but that profit has declined.
See our latest analysis for Mesaieed Petrochemical Holding Company Q.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 a tax benefit impacted Mesaieed Petrochemical Holding Company Q.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 Mesaieed Petrochemical Holding Company Q.S.C.
An Unusual Tax Situation
Mesaieed Petrochemical Holding Company Q.S.C reported a tax benefit of ر.ق71m, which is well worth noting. This is meaningful because companies usually pay tax rather than receive tax benefits. The receipt of a tax benefit is obviously a good thing, on its own. However, our data indicates that tax benefits can temporarily boost statutory profit in the year it is booked, but subsequently profit may fall back. In the likely event the tax benefit is not repeated, we’d expect to see its statutory profit levels drop, at least in the absence of strong growth. So while we think it’s great to receive a tax benefit, it does tend to imply an increased risk that the statutory profit overstates the sustainable earnings power of the business.
Our Take On Mesaieed Petrochemical Holding Company Q.S.C’s Profit Performance
As we have already discussed Mesaieed Petrochemical Holding Company Q.S.C reported that it received a tax benefit, rather than paying tax, in the last year. Given that sort of benefit is not recurring, a focus on the statutory profit might make the company seem better than it really is. Therefore, it seems possible to us that Mesaieed Petrochemical Holding Company Q.S.C’s true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over the last twelve months. 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. While it’s very important to consider the profit and loss statement, you can also learn a lot about a company by looking at its balance sheet. You can seeour latest analysis on Mesaieed Petrochemical Holding Company Q.S.C’s balance sheet health here.
This note has only looked at a single factor that sheds light on the nature of Mesaieed Petrochemical Holding Company Q.S.C’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. 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.
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.
Discounted cash flow calculation for every stock
Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE."profit" - Google News
January 01, 2020 at 07:43PM
https://ift.tt/35gTIBC
Does Mesaieed Petrochemical Holding Company Q.S.C’s (DSM:MPHC) Statutory Profit Adequately Reflect Its Underlying Profit? - Simply Wall St
"profit" - Google News
https://ift.tt/2sPbajb
Shoes Man Tutorial
Pos News Update
Meme Update
Korean Entertainment News
Japan News Update
No comments:
Post a Comment