I.E.S Holdings' (TLV:IES) Problems Go Beyond Weak Profit

I.E.S Holdings Ltd's (TLV:IES) recent weak earnings report didn't cause a big stock movement. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

View our latest analysis for I.E.S Holdings

The Impact Of Unusual Items On Profit

Importantly, our data indicates that I.E.S Holdings' profit received a boost of ₪17m in unusual items, over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's as you'd expect, given these boosts are described as 'unusual'. I.E.S Holdings 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 I.E.S Holdings.

Our Take On I.E.S Holdings' Profit Performance

As we discussed above, we think the significant positive unusual item makes I.E.S Holdings' earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that I.E.S Holdings' underlying earnings power is lower than its statutory profit. But at least holders can take some solace from the 26% per annum growth in EPS for the last three. 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. If you'd like to know more about I.E.S Holdings as a business, it's important to be aware of any risks it's facing. For example, we've discovered 2 warning signs that you should run your eye over to get a better picture of I.E.S Holdings.

Today we've zoomed in on a single data point to better understand the nature of I.E.S Holdings' 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 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.