Here's Why We Don't Think Mordechai Aviv Taasiot Beniyah (1973)'s (TLV:AVIV) Statutory Earnings Reflect Its Underlying Earnings Potential

As a general rule, we think profitable companies are less risky than companies that lose money. Having said that, sometimes statutory profit levels are not a good guide to ongoing profitability, because some short term one-off factor has impacted profit levels. This article will consider whether Mordechai Aviv Taasiot Beniyah (1973)'s (TLV:AVIV) statutory profits are a good guide to its underlying earnings.

While Mordechai Aviv Taasiot Beniyah (1973) was able to generate revenue of ₪206.2m in the last twelve months, we think its profit result of ₪13.9m was more important. The chart below shows how it has grown revenue over the last three years, but that profit has declined.

View our latest analysis for Mordechai Aviv Taasiot Beniyah (1973)

Of course, when it comes to statutory profit, the devil is often in the detail, and we can get a better sense for a company by diving deeper into the financial statements. This article will discuss how unusual items have impacted Mordechai Aviv Taasiot Beniyah (1973)'s most recent profit results. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Mordechai Aviv Taasiot Beniyah (1973).

How Do Unusual Items Influence Profit?

To properly understand Mordechai Aviv Taasiot Beniyah (1973)'s profit results, we need to consider the ₪6.2m gain attributed to unusual items. 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 that's as you'd expect, given these boosts are described as 'unusual'. We can see that Mordechai Aviv Taasiot Beniyah (1973)'s positive unusual items were quite significant relative to its profit in the year to September 2020. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

Our Take On Mordechai Aviv Taasiot Beniyah (1973)'s Profit Performance

As previously mentioned, Mordechai Aviv Taasiot Beniyah (1973)'s large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. As a result, we think it may well be the case that Mordechai Aviv Taasiot Beniyah (1973)'s underlying earnings power is lower than its statutory profit. In further bad news, its earnings per share decreased in the last year. 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 Mordechai Aviv Taasiot Beniyah (1973) as a business, it's important to be aware of any risks it's facing. Our analysis shows 5 warning signs for Mordechai Aviv Taasiot Beniyah (1973) (1 is concerning!) and we strongly recommend you look at these before investing.

Today we've zoomed in on a single data point to better understand the nature of Mordechai Aviv Taasiot Beniyah (1973)'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. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying to be useful.

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This article by Simply Wall St is general in nature. 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.
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