We Think That There Are Issues Underlying Y.H. Dimri Construction & Development's (TLV:DIMRI) Earnings

Unsurprisingly, Y.H. Dimri Construction & Development Ltd's (TLV:DIMRI) stock price was strong on the back of its healthy earnings report. However, we think that shareholders may be missing some concerning details in the numbers.

Check out our latest analysis for Y.H. Dimri Construction & Development

How Do Unusual Items Influence Profit?

To properly understand Y.H. Dimri Construction & Development's profit results, we need to consider the ₪62m gain attributed to unusual items. 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, after all, that's exactly what the accounting terminology implies. If Y.H. Dimri Construction & Development 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.H. Dimri Construction & Development.

Our Take On Y.H. Dimri Construction & Development's Profit Performance

Arguably, Y.H. Dimri Construction & Development's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Y.H. Dimri Construction & Development's statutory profits are better than its underlying earnings power. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. To that end, you should learn about the 2 warning signs we've spotted with Y.H. Dimri Construction & Development (including 1 which shouldn't be ignored).

This note has only looked at a single factor that sheds light on the nature of Y.H. Dimri Construction & Development'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. 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.