We Think Shikun & Binui Energy's (TLV:SBEN) Solid Earnings Are Understated

Shikun & Binui Energy Ltd's (TLV:SBEN) solid earnings announcement recently didn't do much to the stock price. We did some analysis to find out why and believe that investors might be missing some encouraging factors contained in the earnings.

See our latest analysis for Shikun & Binui Energy

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Shikun & Binui Energy's profit was reduced by ₪21m, due to unusual items, over the last year. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Shikun & Binui Energy to produce a higher profit next year, all else being equal.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Shikun & Binui Energy.

Our Take On Shikun & Binui Energy's Profit Performance

Unusual items (expenses) detracted from Shikun & Binui Energy's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Shikun & Binui Energy's statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at an extremely impressive rate over the last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. If you'd like to know more about Shikun & Binui Energy as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 1 warning sign for Shikun & Binui Energy you should know about.

Today we've zoomed in on a single data point to better understand the nature of Shikun & Binui Energy's 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. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying to be useful.

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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.