Blue Square Real Estate's (TLV:BLSR) Shareholders Have More To Worry About Than Lackluster Earnings

Simply Wall St · 2d ago

Investors were disappointed with Blue Square Real Estate Ltd's (TLV:BLSR) recent earnings. We looked deeper and believe that there is even more to be worried about, beyond the soft profit numbers.

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TASE:BLSR Earnings and Revenue History June 10th 2025

The Power Of Non-Operating Revenue

Most companies divide classify their revenue as either 'operating revenue', which comes from normal operations, and other revenue, which could include government grants, for example. Where possible, we prefer rely on operating revenue to get a better understanding of how the business is functioning. Importantly, the non-operating revenue often comes without associated ongoing costs, so it can boost profit by letting it fall straight to the bottom line, making the operating business seem better than it really is. It's worth noting that Blue Square Real Estate saw a big increase in non-operating revenue over the last year. Indeed, its non-operating revenue rose from ₪205.2m last year to ₪400.9m this year. If that non-operating revenue fails to manifest in the current year, then there's a real risk the bottom line profit result will be impacted negatively. Sometimes, you can get a better idea of the underlying earnings potential of a company by excluding unusual boosts to non-operating revenue.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Blue Square Real Estate.

The Impact Of Unusual Items On Profit

As well as that spike in non-operating revenue, we should also consider the ₪333m boost to profit coming from 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 crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And, after all, that's exactly what the accounting terminology implies. We can see that Blue Square Real Estate's positive unusual items were quite significant relative to its profit in the year to March 2025. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

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Our Take On Blue Square Real Estate's Profit Performance

In the last year Blue Square Real Estate's non-operating revenue really gave it a boost, but not in a way that is necessarily going to be sustained. And on top of that, it also saw an unusual item boost its profit, suggesting that next year might see a lower profit number, if these events are not repeated and everything else is equal. On reflection, the above-mentioned factors give us the strong impression that Blue Square Real Estate'sunderlying earnings power is not as good as it might seem, based on the statutory profit numbers. So while earnings quality is important, it's equally important to consider the risks facing Blue Square Real Estate at this point in time. For example, Blue Square Real Estate has 4 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

Our examination of Blue Square Real Estate has focussed on certain factors that can make its earnings look better than they are. And, on that basis, we are somewhat skeptical. 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.