MirLand Development (TLV:MLD) Strong Profits May Be Masking Some Underlying Issues

By
Simply Wall St
Published
May 31, 2021
TASE:MLD
Source: Shutterstock

MirLand Development Corporation Plc's (TLV:MLD) healthy profit numbers didn't contain any surprises for investors. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers.

Check out our latest analysis for MirLand Development

earnings-and-revenue-history
TASE:MLD Earnings and Revenue History June 1st 2021

The Impact Of Unusual Items On Profit

To properly understand MirLand Development's profit results, we need to consider the US$36m 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. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. We can see that MirLand Development's positive unusual items were quite significant relative to its profit in the year to March 2021. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of MirLand Development.

Our Take On MirLand Development's Profit Performance

As previously mentioned, MirLand Development's large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. For this reason, we think that MirLand Development's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. The good news is that it earned a profit in the last twelve months, despite its previous loss. 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. So while earnings quality is important, it's equally important to consider the risks facing MirLand Development at this point in time. When we did our research, we found 5 warning signs for MirLand Development (3 are potentially serious!) that we believe deserve your full attention.

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