Vitania's (TLV:VTNA) Shareholders Have More To Worry About Than Only Soft Earnings

A lackluster earnings announcement from Vitania Ltd. (TLV:VTNA) last week didn't sink the stock price. However, we believe that investors should be aware of some underlying factors which may be of concern.

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The Power Of Non-Operating Revenue

At most companies, some revenue streams, such as government grants, are accounted for as non-operating revenue, while the core business is said to produce operating revenue. 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. Notably, Vitania had a significant increase in non-operating revenue over the last year. Indeed, its non-operating revenue rose from ₪153.5m last year to ₪227.7m this year. 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 Vitania.

The Impact Of Unusual Items On Profit

On top of the non-operating revenue spike, we should also consider the ₪39m impact of unusual items in the last year, which had the effect of suppressing profit. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. In the twelve months to September 2025, Vitania had a big unusual items expense. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be.

An Unusual Tax Situation

Moving on from the unusual items and the non-operating revenue, we note that Vitania profited from a tax benefit which contributed₪8.5m to profit. This is meaningful because companies usually pay tax rather than receive tax benefits. Of course, prima facie it's great to receive a tax benefit. However, the devil in the detail is that these kind of benefits only impact in the year they are booked, and are often one-off in nature. In the likely event the tax benefit is not repeated, we'd expect to see its statutory profit levels drop, at least in the absence of strong growth. While we think it's good that the company has booked a tax benefit, it does mean that there's every chance the statutory profit will come in a lot higher than it would be if the income was adjusted for one-off factors.

Our Take On Vitania's Profit Performance

In the last year Vitania's non-operating revenue really gave it a boost, but not in a way that is necessarily going to be sustained. And on top of that, its profit was boosted by a tax benefit! In contrast, it also booked a charge to unusual items, which suppressed its profit. After taking into account all the aforementioned observations we think that Vitania's profits probably give a generous impression of its sustainable level of profitability. If you want to do dive deeper into Vitania, you'd also look into what risks it is currently facing. For example, Vitania has 5 warning signs (and 2 which are a bit unpleasant) we think you should know about.

Our examination of Vitania has focussed on certain factors that can make its earnings look better than they are. And, on that basis, we are somewhat skeptical. 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 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.