We're Not So Sure You Should Rely on Dor Alon Energy In Israel (1988)'s (TLV:DRAL) Statutory Earnings

As a general rule, we think profitable companies are less risky than companies that lose money. 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 Dor Alon Energy In Israel (1988) (TLV:DRAL).

We like the fact that Dor Alon Energy In Israel (1988) made a profit of ₪70.3m on its revenue of ₪3.65b, in the last year. As you can see below, its profit has actually declined over the last three years, even though its revenue was flat.

See our latest analysis for Dor Alon Energy In Israel (1988)

Importantly, statutory profits are not always the best tool for understanding a company's true earnings power, so it's well worth examining profits in a little more detail. This article will focus on the impact unusual items have had on Dor Alon Energy In Israel (1988)'s statutory earnings. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Dor Alon Energy In Israel (1988).

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Dor Alon Energy In Israel (1988)'s profit received a boost of ₪54m 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. Which is hardly surprising, given the name. We can see that Dor Alon Energy In Israel (1988)'s positive unusual items were quite significant relative to its profit in the year to June 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 Dor Alon Energy In Israel (1988)'s Profit Performance

As we discussed above, we think the significant positive unusual item makes Dor Alon Energy In Israel (1988)'searnings a poor guide to its underlying profitability. For this reason, we think that Dor Alon Energy In Israel (1988)'s statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. Sadly, its EPS was down over the last twelve months. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For instance, we've identified 4 warning signs for Dor Alon Energy In Israel (1988) (1 is a bit concerning) you should be familiar with.

This note has only looked at a single factor that sheds light on the nature of Dor Alon Energy In Israel (1988)'s profit. But there are plenty of other ways to inform your opinion of a company. 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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