Mivne Real Estate (K.D)'s (TLV:MVNE) Sluggish Earnings Might Be Just The Beginning Of Its Problems

Last week's earnings announcement from Mivne Real Estate (K.D) Ltd (TLV:MVNE) was disappointing to investors, with a sluggish profit figure. We did some further digging and think they have a few more reasons to be concerned beyond the statutory profit.

Check out our latest analysis for Mivne Real Estate (K.D)

Operating Revenue Or Not?

Most companies divide classify their revenue as either 'operating revenue', which comes from normal operations, and other revenue, which could include government grants, for example. Oftentimes, non-operating revenue spikes are not repeated, so it makes sense to be cautious where non-operating revenue has made a very large contribution to total profit. However, we note that when non-operating revenue increases suddenly, it will sometimes generate an unsustainable boost to profit. It's worth noting that Mivne Real Estate (K.D) saw a big increase in non-operating revenue over the last year. In fact, our data indicates that non-operating revenue increased from ₪75.5m to ₪145.3m. The high levels of non-operating revenue are problematic because if (and when) they do not repeat, then overall revenue (and profitability) of the firm will fall. Sometimes, you can get a better idea of the underlying earnings potential of a company by excluding unusual boosts to non-operating revenue.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Mivne Real Estate (K.D).

Our Take On Mivne Real Estate (K.D)'s Profit Performance

As discussed above, Mivne Real Estate (K.D)'s sharp increase in non-operating revenue boosted its profit over the last year, and if that non-operating revenue is not repeated, then the trailing twelve months profit probably isn't as good as it seems. Therefore, it seems possible to us that Mivne Real Estate (K.D)'s true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over the last twelve months. 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. If you'd like to know more about Mivne Real Estate (K.D) as a business, it's important to be aware of any risks it's facing. When we did our research, we found 3 warning signs for Mivne Real Estate (K.D) (1 is significant!) that we believe deserve your full attention.

This note has only looked at a single factor that sheds light on the nature of Mivne Real Estate (K.D)'s profit. But there are plenty of other ways to inform your opinion of a company. 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.