Following the solid earnings report from Y.Z. Queenco Ltd. (TLV:QNCO), the market responded by bidding up the stock price. While the profit numbers were good, our analysis has found some concerning factors that shareholders should be aware of.
Check out our latest analysis for Y.Z. Queenco
How Do Unusual Items Influence Profit?
Importantly, our data indicates that Y.Z. Queenco's profit received a boost of ₪1.4m 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 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. If Y.Z. Queenco doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Y.Z. Queenco.
Our Take On Y.Z. Queenco's Profit Performance
We'd posit that Y.Z. Queenco's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Y.Z. Queenco's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 8.4% EPS growth 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Case in point: We've spotted 3 warning signs for Y.Z. Queenco you should be mindful of and 1 of these is a bit unpleasant.
This note has only looked at a single factor that sheds light on the nature of Y.Z. Queenco's profit. But there are plenty of other ways to inform your opinion of a company. 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 that insiders are buying.
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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.
About TASE:QNCO
Flawless balance sheet with solid track record.
