Concerns Surrounding Azorim-Investment Development & Construction's (TLV:AZRM) Performance

Azorim-Investment, Development & Construction Co. Ltd's (TLV:AZRM) healthy profit numbers didn't contain any surprises for investors. However the statutory profit number doesn't tell the whole story, and we have found some factors which might be of concern to shareholders.

See our latest analysis for Azorim-Investment Development & Construction

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Azorim-Investment Development & Construction's profit received a boost of ₪56m 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 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. Which is hardly surprising, given the name. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Azorim-Investment Development & Construction.

Our Take On Azorim-Investment Development & Construction's Profit Performance

We'd posit that Azorim-Investment Development & Construction's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Azorim-Investment Development & Construction's true underlying earnings power is actually less than its statutory profit. The good news is that, its earnings per share increased by 22% in 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. So while earnings quality is important, it's equally important to consider the risks facing Azorim-Investment Development & Construction at this point in time. Case in point: We've spotted 2 warning signs for Azorim-Investment Development & Construction you should be mindful of and 1 of these bad boys can't be ignored.

This note has only looked at a single factor that sheds light on the nature of Azorim-Investment Development & Construction'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.