Israel Land Development's (TLV:ILDC) Soft Earnings Are Actually Better Than They Appear

The market for The Israel Land Development Company Ltd.'s (TLV:ILDC) shares didn't move much after it posted weak earnings recently. Our analysis suggests that while the profits are soft, the foundations of the business are strong.

See our latest analysis for Israel Land Development

How Do Unusual Items Influence Profit?

For anyone who wants to understand Israel Land Development's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by ₪98m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. If Israel Land Development doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Israel Land Development.

Our Take On Israel Land Development's Profit Performance

Because unusual items detracted from Israel Land Development's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Israel Land Development's earnings potential is at least as good as it seems, and maybe even better! Better yet, its EPS are growing strongly, which is nice to see. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. So while earnings quality is important, it's equally important to consider the risks facing Israel Land Development at this point in time. Our analysis shows 4 warning signs for Israel Land Development (2 are concerning!) and we strongly recommend you look at these before investing.

This note has only looked at a single factor that sheds light on the nature of Israel Land Development'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. 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.

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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.