Should You Rely On Meshulam Levinstein Contracting & Engineering's (TLV:LEVI) Earnings Growth?

It might be old fashioned, but we really like to invest in companies that make a profit, each and every year. However, sometimes companies receive a one-off boost (or reduction) to their profit, and it's not always clear whether statutory profits are a good guide, going forward. This article will consider whether Meshulam Levinstein Contracting & Engineering's (TLV:LEVI) statutory profits are a good guide to its underlying earnings.

We like the fact that Meshulam Levinstein Contracting & Engineering made a profit of ₪91.7m on its revenue of ₪616.6m, in the last year. One positive is that it has grown both its profit and its revenue, over the last few years.

View our latest analysis for Meshulam Levinstein Contracting & Engineering

Importantly, statutory profits are not always the best tool for understanding a company's true earnings power, so it's well worth examining profits in a little more detail. This article will discuss how unusual items have impacted Meshulam Levinstein Contracting & Engineering's most recent profit results. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Meshulam Levinstein Contracting & Engineering.

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Meshulam Levinstein Contracting & Engineering's profit received a boost of ₪79m in unusual items, over the last year. 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. 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 September 2020. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

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

As previously mentioned, Meshulam Levinstein Contracting & Engineering's large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. For this reason, we think that Meshulam Levinstein Contracting & Engineering's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. But the happy news is that, while acknowledging we have to look beyond the statutory numbers, those numbers are still improving, with EPS growing at a very high rate over the last year. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example, Meshulam Levinstein Contracting & Engineering has 3 warning signs (and 1 which can't be ignored) we think you should know about.

This note has only looked at a single factor that sheds light on the nature of Meshulam Levinstein Contracting & Engineering'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. 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.
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