Why Alony-Hetz Properties & Investments' (TLV:ALHE) Earnings Are Weaker Than They Seem

Strong earnings weren't enough to please Alony-Hetz Properties & Investments Ltd's (TLV:ALHE) shareholders over the last week. We did some analysis and believe that they might be concerned about some weak underlying factors.

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To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. Alony-Hetz Properties & Investments expanded the number of shares on issue by 20% over the last year. Therefore, each share now receives a smaller portion of profit. To celebrate net income while ignoring dilution is like rejoicing because you have a single slice of a larger pizza, but ignoring the fact that the pizza is now cut into many more slices. You can see a chart of Alony-Hetz Properties & Investments' EPS by clicking here.

How Is Dilution Impacting Alony-Hetz Properties & Investments' Earnings Per Share (EPS)?

We don't have any data on the company's profits from three years ago. And even focusing only on the last twelve months, we don't have a meaningful growth rate because it made a loss a year ago, too. But mathematics aside, it is always good to see when a formerly unprofitable business come good (though we accept profit would have been higher if dilution had not been required). So you can see that the dilution has had a bit of an impact on shareholders.

In the long term, if Alony-Hetz Properties & Investments' earnings per share can increase, then the share price should too. However, if its profit increases while its earnings per share stay flat (or even fall) then shareholders might not see much benefit. For that reason, you could say that EPS is more important that net income in the long run, assuming the goal is to assess whether a company's share price might grow.

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?

Finally, we should also consider the fact that unusual items boosted Alony-Hetz Properties & Investments' net profit by ₪689m over the last year. 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. And that's as you'd expect, given these boosts are described as 'unusual'. We can see that Alony-Hetz Properties & Investments' positive unusual items were quite significant relative to its profit in the year to March 2025. 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 Alony-Hetz Properties & Investments' Profit Performance

In its last report Alony-Hetz Properties & Investments benefitted from unusual items which boosted its profit, which could make the profit seem better than it really is on a sustainable basis. On top of that, the dilution means that its earnings per share performance is worse than its profit performance. For the reasons mentioned above, we think that a perfunctory glance at Alony-Hetz Properties & Investments' statutory profits might make it look better than it really is on an underlying level. If you want to do dive deeper into Alony-Hetz Properties & Investments, you'd also look into what risks it is currently facing. For instance, we've identified 5 warning signs for Alony-Hetz Properties & Investments (3 are a bit concerning) you should be familiar with.

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. 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. 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.