Meshulam Levinstein Contracting & Engineering's (TLV:LEVI) Weak Earnings Might Be Worse Than They Appear

Meshulam Levinstein Contracting & Engineering Ltd. (TLV:LEVI) recently posted soft earnings but shareholders didn't react strongly. We did some analysis and found some concerning details beneath the statutory profit number.

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. As it happens, Meshulam Levinstein Contracting & Engineering issued 25% more new shares over the last year. Therefore, each share now receives a smaller portion of profit. To talk about net income, without noticing earnings per share, is to be distracted by the big numbers while ignoring the smaller numbers that talk to per share value. Check out Meshulam Levinstein Contracting & Engineering's historical EPS growth by clicking on this link.

A Look At The Impact Of Meshulam Levinstein Contracting & Engineering's Dilution On Its Earnings Per Share (EPS)

Meshulam Levinstein Contracting & Engineering's net profit dropped by 86% per year over the last three years. Even looking at the last year, profit was still down 48%. Like a sack of potatoes thrown from a delivery truck, EPS fell harder, down 48% in the same period. And so, you can see quite clearly that dilution is having a rather significant impact on shareholders.

In the long term, if Meshulam Levinstein Contracting & Engineering's earnings per share can increase, then the share price should too. But on the other hand, we'd be far less excited to learn profit (but not EPS) was improving. For the ordinary retail shareholder, EPS is a great measure to check your hypothetical "share" of the company's profit.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Meshulam Levinstein Contracting & Engineering.

How Do Unusual Items Influence Profit?

Alongside that dilution, it's also important to note that Meshulam Levinstein Contracting & Engineering's profit was boosted by unusual items worth ₪26m in the last twelve months. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. We can see that Meshulam Levinstein Contracting & Engineering's positive unusual items were quite significant relative to its profit in the year to December 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Our Take On Meshulam Levinstein Contracting & Engineering's Profit Performance

In its last report Meshulam Levinstein Contracting & Engineering benefitted from unusual items which boosted its profit, which could make the profit seem better than it really is on a sustainable basis. And furthermore, it went and issued plenty of new shares, ensuring that each shareholder (who did not tip more money in) now owns a smaller proportion of the company. For the reasons mentioned above, we think that a perfunctory glance at Meshulam Levinstein Contracting & Engineering's statutory profits might make it look better than it really is on an underlying level. If you want to do dive deeper into Meshulam Levinstein Contracting & Engineering, you'd also look into what risks it is currently facing. Be aware that Meshulam Levinstein Contracting & Engineering is showing 5 warning signs in our investment analysis and 2 of those don't sit too well with us...

In this article we've looked at a number of factors that can impair the utility of profit numbers, and we've come away cautious. But there are plenty of other ways to inform your opinion of a company. 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.