Solid Earnings May Not Tell The Whole Story For Rafael Holdings (NYSE:RFL)

Rafael Holdings, Inc.'s (NYSE:RFL) healthy profit numbers didn't contain any surprises for investors. We think this is due to investors looking beyond the statutory profits and being concerned with what they see.

View our latest analysis for Rafael Holdings

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Rafael Holdings' profit received a boost of US$10.0m 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. And that's as you'd expect, given these boosts are described as 'unusual'. We can see that Rafael Holdings' positive unusual items were quite significant relative to its profit in the year to January 2024. 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 Rafael Holdings.

Our Take On Rafael Holdings' Profit Performance

As we discussed above, we think the significant positive unusual item makes Rafael Holdings' earnings a poor guide to its underlying profitability. For this reason, we think that Rafael Holdings' 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. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Case in point: We've spotted 3 warning signs for Rafael Holdings you should be mindful of and 1 of them makes us a bit uncomfortable.

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