Rapac Communication & Infrastructure (TLV:RPAC) Posted Healthy Earnings But There Are Some Other Factors To Be Aware Of

Rapac Communication & Infrastructure Ltd (TLV:RPAC) announced strong profits, but the stock was stagnant. We did some digging, and we found some concerning factors in the details.

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How Do Unusual Items Influence Profit?

For anyone who wants to understand Rapac Communication & Infrastructure's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₪7.6m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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 Rapac Communication & Infrastructure.

Our Take On Rapac Communication & Infrastructure's Profit Performance

Arguably, Rapac Communication & Infrastructure's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Rapac Communication & Infrastructure's true underlying earnings power is actually less than its statutory profit. The silver lining is that its EPS growth over the last year has been really wonderful, even if it's not a perfect measure. 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. 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. To help with this, we've discovered 2 warning signs (1 doesn't sit too well with us!) that you ought to be aware of before buying any shares in Rapac Communication & Infrastructure.

This note has only looked at a single factor that sheds light on the nature of Rapac Communication & Infrastructure's profit. But there are plenty of other ways to inform your opinion of a company. 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. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful.

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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.