Why National Company for Glass Industries' (TADAWUL:2150) Earnings Are Better Than They Seem
The market seemed underwhelmed by last week's earnings announcement from The National Company for Glass Industries (TADAWUL:2150) despite the healthy numbers. We did some digging, and we think that investors are missing some encouraging factors in the underlying numbers.
A Closer Look At National Company for Glass Industries' Earnings
Many investors haven't heard of the accrual ratio from cashflow, but it is actually a useful measure of how well a company's profit is backed up by free cash flow (FCF) during a given period. 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. The ratio shows us how much a company's profit exceeds its FCF.
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 having an accrual ratio above zero is of little concern, we do think it's worth noting when a company has a relatively high accrual ratio. That's because some academic studies have suggested that high accruals ratios tend to lead to lower profit or less profit growth.
For the year to September 2026, National Company for Glass Industries had an accrual ratio of 0.21. We can therefore deduce that its free cash flow fell well short of covering its statutory profit. In the last twelve months it actually had negative free cash flow, with an outflow of ر.س57m despite its profit of ر.س126.3m, mentioned above. Coming off the back of negative free cash flow last year, we imagine some shareholders might wonder if its cash burn of ر.س57m, this year, indicates high risk. However, that's not all there is to consider. We can see that unusual items have impacted its statutory profit, and therefore the accrual ratio.
See our latest analysis for National Company for Glass Industries
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of National Company for Glass Industries.
How Do Unusual Items Influence Profit?
Unfortunately (in the short term) National Company for Glass Industries saw its profit reduced by unusual items worth ر.س1.3m. If this was a non-cash charge, it would have made the accrual ratio better, if cashflow had stayed strong, so it's not great to see in combination with an uninspiring accrual ratio. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. In the twelve months to September 2026, National Company for Glass Industries had a big unusual items expense. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be.
Our Take On National Company for Glass Industries' Profit Performance
In conclusion, National Company for Glass Industries' accrual ratio suggests that its statutory earnings are not backed by cash flow, even though unusual items weighed on profit. Based on these factors, we think that National Company for Glass Industries' profits are a reasonably conservative guide to its underlying profitability. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Our analysis shows 2 warning signs for National Company for Glass Industries (1 is concerning!) and we strongly recommend you look at these before investing.
Our examination of National Company for Glass Industries has focussed on certain factors that can make its earnings look better than they are. 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. 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 with significant insider holdings to be useful.
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