Solid Earnings May Not Tell The Whole Story For Azorim-Investment Development & Construction (TLV:AZRM)

Azorim-Investment, Development & Construction Co. Ltd's (TLV:AZRM) robust recent earnings didn't do much to move the stock. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers.

Check out our latest analysis for Azorim-Investment Development & Construction

The Impact Of Unusual Items On Profit

For anyone who wants to understand Azorim-Investment Development & Construction's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₪142m 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. 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. We can see that Azorim-Investment Development & Construction's positive unusual items were quite significant relative to its profit in the year to December 2023. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

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

As we discussed above, we think the significant positive unusual item makes Azorim-Investment Development & Construction's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Azorim-Investment Development & Construction's underlying earnings power is lower than its statutory profit. But at least holders can take some solace from the 60% per annum growth in EPS for the last three. 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. Our analysis shows 2 warning signs for Azorim-Investment Development & Construction (1 is a bit concerning!) and we strongly recommend you look at these before investing.

Today we've zoomed in on a single data point to better understand 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. 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.