Kenon Holdings Ltd.'s (TLV:KEN) strong earnings report was rewarded with a positive stock price move. We did some digging and found some further encouraging factors that investors will like.
How Do Unusual Items Influence Profit?
Importantly, our data indicates that Kenon Holdings' profit was reduced by US$64m, 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. In the twelve months to June 2025, Kenon Holdings had a big unusual items expense. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Kenon Holdings.
Our Take On Kenon Holdings' Profit Performance
As we discussed above, we think the significant unusual expense will make Kenon Holdings' statutory profit lower than it would otherwise have been. Because of this, we think Kenon Holdings' underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! And it's also positive that the company showed enough improvement to book a profit this year, after losing money 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. So while earnings quality is important, it's equally important to consider the risks facing Kenon Holdings at this point in time. When we did our research, we found 2 warning signs for Kenon Holdings (1 doesn't sit too well with us!) that we believe deserve your full attention.
This note has only looked at a single factor that sheds light on the nature of Kenon Holdings' 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 with high insider ownership.
Valuation is complex, but we're here to simplify it.
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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.