Israel Shipyards Industries' (TLV:ISHI) Sluggish Earnings Might Be Just The Beginning Of Its Problems

The subdued market reaction suggests that Israel Shipyards Industries Ltd's (TLV:ISHI) recent earnings didn't contain any surprises. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

See our latest analysis for Israel Shipyards Industries

How Do Unusual Items Influence Profit?

To properly understand Israel Shipyards Industries' profit results, we need to consider the ₪22m gain attributed to unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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'. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

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

Our Take On Israel Shipyards Industries' Profit Performance

We'd posit that Israel Shipyards Industries' statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Israel Shipyards Industries' statutory profits are better than its underlying earnings power. Nonetheless, it's still worth noting that its earnings per share have grown at 18% over the last three years. 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 want to do dive deeper into Israel Shipyards Industries, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 1 warning sign with Israel Shipyards Industries, and understanding it should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of Israel Shipyards Industries' 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. 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.