Golan Renewable Industries' (TLV:GRIN) Anemic Earnings Might Be Worse Than You Think

A lackluster earnings announcement from Golan Renewable Industries Ltd (TLV:GRIN) last week didn't sink the stock price. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

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How Do Unusual Items Influence Profit?

For anyone who wants to understand Golan Renewable Industries' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₪1.9m worth of unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's as you'd expect, given these boosts are described as 'unusual'. If Golan Renewable Industries doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Golan Renewable Industries.

Our Take On Golan Renewable Industries' Profit Performance

We'd posit that Golan Renewable Industries' statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Golan Renewable Industries' true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over the last twelve months. 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. If you'd like to know more about Golan Renewable Industries as a business, it's important to be aware of any risks it's facing. For instance, we've identified 3 warning signs for Golan Renewable Industries (2 are significant) you should be familiar with.

Today we've zoomed in on a single data point to better understand the nature of Golan Renewable Industries' 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 with high insider ownership.

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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.