Amanet Management & Systems' (TLV:AMAN) Shareholders Have More To Worry About Than Lackluster Earnings

Amanet Management & Systems Ltd.'s (TLV:AMAN) weak earnings were disregarded by the market. Despite the strength in the stock, we feel that investors should be cautious about some numbers in the earnings.

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To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. As it happens, Amanet Management & Systems issued 10% more new shares over the last year. As a result, its net income is now split between a greater number of shares. 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. You can see a chart of Amanet Management & Systems' EPS by clicking here.

A Look At The Impact Of Amanet Management & Systems' Dilution On Its Earnings Per Share (EPS)

Unfortunately, we don't have any visibility into its profits three years back, because we lack the data. And even focusing only on the last twelve months, we see profit is down 29%. Sadly, earnings per share fell further, down a full 29% in that time. So you can see that the dilution has had a bit of an impact on shareholders.

If Amanet Management & Systems' EPS can grow over time then that drastically improves the chances of the share price moving in the same direction. 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 Amanet Management & Systems.

The Impact Of Unusual Items On Profit

Alongside that dilution, it's also important to note that Amanet Management & Systems' profit was boosted by unusual items worth ₪5.7m in the last twelve months. 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 crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And, after all, that's exactly what the accounting terminology implies. We can see that Amanet Management & Systems' positive unusual items were quite significant relative to its profit in the year to June 2025. 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 Amanet Management & Systems' Profit Performance

In its last report Amanet Management & Systems benefitted from unusual items which boosted its profit, which could make the profit seem better than it really is on a sustainable basis. On top of that, the dilution means that its earnings per share performance is worse than its profit performance. For the reasons mentioned above, we think that a perfunctory glance at Amanet Management & Systems' statutory profits might make it look better than it really is on an underlying level. So while earnings quality is important, it's equally important to consider the risks facing Amanet Management & Systems at this point in time. For example - Amanet Management & Systems has 4 warning signs we think you should be aware of.

Our examination of Amanet Management & Systems has focussed on certain factors that can make its earnings look better than they are. And, on that basis, we are somewhat skeptical. 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.