We're Not So Sure You Should Rely on Levinstein Properties's (TLV:LVPR) Statutory Earnings

It might be old fashioned, but we really like to invest in companies that make a profit, each and every year. That said, the current statutory profit is not always a good guide to a company's underlying profitability. In this article, we'll look at how useful this year's statutory profit is, when analysing Levinstein Properties (TLV:LVPR).

While Levinstein Properties was able to generate revenue of ₪68.8m in the last twelve months, we think its profit result of ₪90.0m 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 Levinstein Properties

Not all profits are equal, and we can learn more about the nature of a company's past profitability by diving deeper into the financial statements. This article will focus on the impact unusual items have had on Levinstein Properties' statutory earnings. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Levinstein Properties.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Levinstein Properties' profit received a boost of ₪79m in unusual items, over the last year. 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 analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. Levinstein Properties had a rather significant contribution from unusual items relative to its profit to September 2020. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Our Take On Levinstein Properties' Profit Performance

As we discussed above, we think the significant positive unusual item makes Levinstein Properties'earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Levinstein Properties' underlying earnings power is lower than its statutory profit. The good news is that, its earnings per share increased by 80% in the last year. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Case in point: We've spotted 5 warning signs for Levinstein Properties you should be mindful of and 2 of them are significant.

This note has only looked at a single factor that sheds light on the nature of Levinstein Properties' 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. 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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