Delta Israel Brands' (TLV:DLTI) Soft Earnings Don't Show The Whole Picture

The most recent earnings report from Delta Israel Brands Ltd (TLV:DLTI) was disappointing for shareholders. While the headline numbers were soft, we believe that investors might be missing some encouraging factors.

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A Closer Look At Delta Israel Brands' Earnings

As finance nerds would already know, the accrual ratio from cashflow is a key measure for assessing how well a company's free cash flow (FCF) matches its profit. To get the accrual ratio we first subtract FCF from profit for a period, and then divide that number by the average operating assets for the period. You could think of the accrual ratio from cashflow as the 'non-FCF profit ratio'.

As a result, a negative accrual ratio is a positive for the company, and a positive accrual ratio is a negative. While having an accrual ratio above zero is of little concern, we do think it's worth noting when a company has a relatively high accrual ratio. To quote a 2014 paper by Lewellen and Resutek, "firms with higher accruals tend to be less profitable in the future".

For the year to June 2026, Delta Israel Brands had an accrual ratio of -0.34. That indicates that its free cash flow quite significantly exceeded its statutory profit. To wit, it produced free cash flow of ₪258m during the period, dwarfing its reported profit of ₪146.7m. Delta Israel Brands shareholders are no doubt pleased that free cash flow improved over the last twelve months.

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

Our Take On Delta Israel Brands' Profit Performance

Happily for shareholders, Delta Israel Brands produced plenty of free cash flow to back up its statutory profit numbers. Based on this observation, we consider it possible that Delta Israel Brands' statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at 59% per year over the last three years. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Every company has risks, and we've spotted 1 warning sign for Delta Israel Brands you should know about.

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