We Think You Can Look Beyond Gan Shmuel Foods' (TLV:GSFI) Lackluster Earnings
Gan Shmuel Foods Ltd.'s (TLV:GSFI) earnings announcement last week didn't impress shareholders. Despite the soft profit numbers, our analysis has optimistic about the overall quality of the income statement.
How Do Unusual Items Influence Profit?
Importantly, our data indicates that Gan Shmuel Foods' profit was reduced by US$5.4m, due to unusual items, over the last year. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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. Assuming those unusual expenses don't come up again, we'd therefore expect Gan Shmuel Foods to produce a higher profit next year, all else being equal.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Gan Shmuel Foods.
Our Take On Gan Shmuel Foods' Profit Performance
Unusual items (expenses) detracted from Gan Shmuel Foods' earnings over the last year, but we might see an improvement next year. Because of this, we think Gan Shmuel Foods' earnings potential is at least as good as it seems, and maybe even better! On the other hand, its EPS actually shrunk in the last twelve months. 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 Gan Shmuel Foods at this point in time. At Simply Wall St, we found 2 warning signs for Gan Shmuel Foods and we think they deserve your attention.
This note has only looked at a single factor that sheds light on the nature of Gan Shmuel Foods' profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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 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.