The market wasn't impressed with the soft earnings from Gav-Yam Lands Corp. Ltd (TLV:GVYM) recently. We did some analysis, and found that there are some reasons to be cautious about the headline numbers.
See our latest analysis for Gav-Yam Lands
How Do Unusual Items Influence Profit?
Importantly, our data indicates that Gav-Yam Lands' profit received a boost of ₪436m 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 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. Gav-Yam Lands had a rather significant contribution from unusual items relative to its profit to December 2023. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Gav-Yam Lands.
Our Take On Gav-Yam Lands' Profit Performance
As we discussed above, we think the significant positive unusual item makes Gav-Yam Lands' earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Gav-Yam Lands' underlying earnings power is lower than its statutory profit. But the good news is that its EPS growth over the last three years has been very impressive. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For example, we've found that Gav-Yam Lands has 4 warning signs (1 shouldn't be ignored!) that deserve your attention before going any further with your analysis.
This note has only looked at a single factor that sheds light on the nature of Gav-Yam Lands' 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. 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:GVYM
Average dividend payer slight.
