CI Systems (Israel)'s (TLV:CISY) Earnings Are Weaker Than They Seem

CI Systems (Israel) Ltd.'s (TLV:CISY) stock was strong after they recently reported robust earnings. We did some analysis and think that investors are missing some details hidden beneath the profit numbers.

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The Impact Of Unusual Items On Profit

To properly understand CI Systems (Israel)'s profit results, we need to consider the US$170k 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. And that's as you'd expect, given these boosts are described as 'unusual'. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of CI Systems (Israel).

Our Take On CI Systems (Israel)'s Profit Performance

Arguably, CI Systems (Israel)'s statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that CI Systems (Israel)'s statutory profits are better than its underlying earnings power. The good news is that, its earnings per share increased by 60% 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Every company has risks, and we've spotted 1 warning sign for CI Systems (Israel) you should know about.

This note has only looked at a single factor that sheds light on the nature of CI Systems (Israel)'s profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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 with high insider ownership.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.