Shareholders Shouldn’t Be Too Comfortable With Alony-Hetz Properties & Investments' (TLV:ALHE) Strong Earnings

We didn't see Alony-Hetz Properties & Investments Ltd's (TLV:ALHE) stock surge when it reported robust earnings recently. We looked deeper into the numbers and found that shareholders might be concerned with some underlying weaknesses.

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The Power Of Non-Operating Revenue

Companies will classify their revenue streams as either operating revenue or other revenue. Where possible, we prefer rely on operating revenue to get a better understanding of how the business is functioning. Importantly, the non-operating revenue often comes without associated ongoing costs, so it can boost profit by letting it fall straight to the bottom line, making the operating business seem better than it really is. It's worth noting that Alony-Hetz Properties & Investments saw a big increase in non-operating revenue over the last year. Indeed, its non-operating revenue rose from -₪556.1m last year to ₪741.6m this year. The high levels of non-operating revenue are problematic because if (and when) they do not repeat, then overall revenue (and profitability) of the firm will fall. Sometimes, you can get a better idea of the underlying earnings potential of a company by excluding unusual boosts to non-operating revenue.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Alony-Hetz Properties & Investments.

How Do Unusual Items Influence Profit?

Alongside that spike in non-operating revenue, it's also important to note that Alony-Hetz Properties & Investments'profit was boosted by unusual items worth ₪609m in the last twelve months. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. 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. We can see that Alony-Hetz Properties & Investments' positive unusual items were quite significant relative to its profit in the year to September 2025. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Our Take On Alony-Hetz Properties & Investments' Profit Performance

In its last report Alony-Hetz Properties & Investments benefitted from a spike in non-operating revenue which may have boosted its profit in a way that may be no more sustainable than low quality coal mining. Furthermore, unusual items also made a nice positive contribution to its profit, which may well drop next year (all else being equal) if these phenomena are not repeated. On reflection, the above-mentioned factors give us the strong impression that Alony-Hetz Properties & Investments'underlying earnings power is not as good as it might seem, based on the statutory profit numbers. If you'd like to know more about Alony-Hetz Properties & Investments as a business, it's important to be aware of any risks it's facing. For example, Alony-Hetz Properties & Investments has 4 warning signs (and 3 which are a bit unpleasant) we think you should know about.

In this article we've looked at a number of factors that can impair the utility of profit numbers, and we've come away cautious. 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.