Stock Analysis

Veridis Environment's (TLV:VRDS) Anemic Earnings Might Be Worse Than You Think

TASE:VRDS
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Veridis Environment Ltd's (TLV:VRDS) recent weak earnings report didn't cause a big stock movement. However, we believe that investors should be aware of some underlying factors which may be of concern.

View our latest analysis for Veridis Environment

earnings-and-revenue-history
TASE:VRDS Earnings and Revenue History December 6th 2021

The Impact Of Unusual Items On Profit

For anyone who wants to understand Veridis Environment's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₪124m worth of unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And, after all, that's exactly what the accounting terminology implies. We can see that Veridis Environment's positive unusual items were quite significant relative to its profit in the year to September 2021. 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 Veridis Environment.

Our Take On Veridis Environment's Profit Performance

As we discussed above, we think the significant positive unusual item makes Veridis Environment's earnings a poor guide to its underlying profitability. For this reason, we think that Veridis Environment's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. Sadly, its EPS was down over the last twelve months. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. You'd be interested to know, that we found 2 warning signs for Veridis Environment and you'll want to know about them.

Today we've zoomed in on a single data point to better understand the nature of Veridis Environment'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. 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.