Lahav LR Real Estate's (TLV:LAHAV) Sluggish Earnings Might Be Just The Beginning Of Its Problems

A lackluster earnings announcement from Lahav LR Real Estate Ltd (TLV:LAHAV) last week didn't sink the stock price. We think that investors are worried about some weaknesses underlying the earnings.

See our latest analysis for Lahav LR Real Estate

How Do Unusual Items Influence Profit?

For anyone who wants to understand Lahav LR Real Estate's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₪25m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Lahav LR Real Estate.

Our Take On Lahav LR Real Estate's Profit Performance

Arguably, Lahav LR Real Estate's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Lahav LR Real Estate's true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased in the last year. 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 while earnings quality is important, it's equally important to consider the risks facing Lahav LR Real Estate at this point in time. Case in point: We've spotted 4 warning signs for Lahav LR Real Estate you should be mindful of and 1 of these bad boys is a bit concerning.

This note has only looked at a single factor that sheds light on the nature of Lahav LR Real Estate'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 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.