We Think That There Are More Issues For Shikun & Binui Energy (TLV:SBEN) Than Just Sluggish Earnings

Last week's earnings announcement from Shikun & Binui Energy Ltd (TLV:SBEN) was disappointing to investors, with a sluggish profit figure. Our analysis has found some reasons to be concerned, beyond the weak headline numbers.

See our latest analysis for Shikun & Binui Energy

How Do Unusual Items Influence Profit?

To properly understand Shikun & Binui Energy's profit results, we need to consider the ₪407m gain attributed to unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. Shikun & Binui Energy had a rather significant contribution from unusual items relative to its profit to September 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

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

As previously mentioned, Shikun & Binui Energy'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 Shikun & Binui Energy'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 good news is that its EPS growth over the last three years has been very impressive. 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. If you want to do dive deeper into Shikun & Binui Energy, you'd also look into what risks it is currently facing. Be aware that Shikun & Binui Energy is showing 4 warning signs in our investment analysis and 2 of those can't be ignored...

This note has only looked at a single factor that sheds light on the nature of Shikun & Binui Energy's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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 with significant insider holdings 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.