Cellcom Israel's (TLV:CEL) Performance Is Even Better Than Its Earnings Suggest

Investors were underwhelmed by the solid earnings posted by Cellcom Israel Ltd. (TLV:CEL) recently. Our analysis says that investors should be optimistic, as the strong profit is built on solid foundations.

Check out our latest analysis for Cellcom Israel

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Cellcom Israel's profit was reduced by ₪61m, due to unusual items, over the last year. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. 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. If Cellcom Israel doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

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

Our Take On Cellcom Israel's Profit Performance

Unusual items (expenses) detracted from Cellcom Israel's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Cellcom Israel's statutory profit actually understates its earnings potential! Furthermore, it has done a great job growing EPS over 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. 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. For example - Cellcom Israel has 2 warning signs we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Cellcom Israel'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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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.