Electra Consumer Products (1970)'s (TLV:ECP) Earnings Are Growing But Is There More To The Story?

As a general rule, we think profitable companies are less risky than companies that lose money. Having said that, sometimes statutory profit levels are not a good guide to ongoing profitability, because some short term one-off factor has impacted profit levels. Today we'll focus on whether this year's statutory profits are a good guide to understanding Electra Consumer Products (1970) (TLV:ECP).

It's good to see that over the last twelve months Electra Consumer Products (1970) made a profit of ₪248.0m on revenue of ₪2.93b. In the chart below, you can see that its profit and revenue have both grown over the last three years.

Check out our latest analysis for Electra Consumer Products (1970)

Importantly, statutory profits are not always the best tool for understanding a company's true earnings power, so it's well worth examining profits in a little more detail. This article will focus on the impact unusual items have had on Electra Consumer Products (1970)'s statutory earnings. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Electra Consumer Products (1970).

The Impact Of Unusual Items On Profit

For anyone who wants to understand Electra Consumer Products (1970)'s profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₪116m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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 that's as you'd expect, given these boosts are described as 'unusual'. Electra Consumer Products (1970) had a rather significant contribution from unusual items relative to its profit to September 2020. 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 Electra Consumer Products (1970)'s Profit Performance

As we discussed above, we think the significant positive unusual item makes Electra Consumer Products (1970)'searnings a poor guide to its underlying profitability. For this reason, we think that Electra Consumer Products (1970)'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. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. 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. For example, we've discovered 2 warning signs that you should run your eye over to get a better picture of Electra Consumer Products (1970).

This note has only looked at a single factor that sheds light on the nature of Electra Consumer Products (1970)'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. 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.
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