Stock Analysis

Does Azrieli Group's (TLV:AZRG) Statutory Profit Adequately Reflect Its Underlying Profit?

TASE:AZRG
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As a general rule, we think profitable companies are less risky than companies that lose money. However, sometimes companies receive a one-off boost (or reduction) to their profit, and it's not always clear whether statutory profits are a good guide, going forward. Today we'll focus on whether this year's statutory profits are a good guide to understanding Azrieli Group (TLV:AZRG).

While Azrieli Group was able to generate revenue of ₪2.00b in the last twelve months, we think its profit result of ₪996.0m was more important. The chart below shows that both revenue and profit have declined over the last three years.

Check out our latest analysis for Azrieli Group

earnings-and-revenue-history
TASE:AZRG Earnings and Revenue History January 30th 2021

Of course, it is only sensible to look beyond the statutory profits and question how well those numbers represent the sustainable earnings power of the business. This article will focus on the impact unusual items have had on Azrieli Group's statutory earnings. That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

How Do Unusual Items Influence Profit?

To properly understand Azrieli Group's profit results, we need to consider the ₪182m gain attributed to unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. 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. Which is hardly surprising, given the name. If Azrieli Group doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Our Take On Azrieli Group's Profit Performance

Arguably, Azrieli Group's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Azrieli Group's statutory profits are better than its underlying earnings power. Sadly, its EPS was down over the last twelve months. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. While conducting our analysis, we found that Azrieli Group has 1 warning sign and it would be unwise to ignore this.

Today we've zoomed in on a single data point to better understand the nature of Azrieli Group'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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