Rekah Pharmaceutical Industry's (TLV:REKA) Problems Go Beyond Weak Profit

Rekah Pharmaceutical Industry Ltd.'s (TLV:REKA) recent weak earnings report didn't cause a big stock movement. We think that investors are worried about some weaknesses underlying the earnings.

View our latest analysis for Rekah Pharmaceutical Industry

The Impact Of Unusual Items On Profit

To properly understand Rekah Pharmaceutical Industry's profit results, we need to consider the ₪1.2m gain attributed to 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 that's as you'd expect, given these boosts are described as 'unusual'. 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 Rekah Pharmaceutical Industry.

Our Take On Rekah Pharmaceutical Industry's Profit Performance

Arguably, Rekah Pharmaceutical Industry's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Rekah Pharmaceutical Industry's statutory profits are better than its underlying earnings power. In further bad news, its earnings per share decreased in the last year. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Be aware that Rekah Pharmaceutical Industry is showing 4 warning signs in our investment analysis and 2 of those are significant...

Today we've zoomed in on a single data point to better understand the nature of Rekah Pharmaceutical Industry'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. 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.