Should You Rely On RPG Life Sciences's (NSE:RPGLIFE) Earnings Growth?

It might be old fashioned, but we really like to invest in companies that make a profit, each and every year. Having said that, sometimes statutory profit levels are not a good guide to ongoing profitability, because some short term one-off factor has impacted profit levels. This article will consider whether RPG Life Sciences's (NSE:RPGLIFE) statutory profits are a good guide to its underlying earnings.

We like the fact that RPG Life Sciences made a profit of ₹290.1m on its revenue of ₹3.76b, in the last year. Happily, it has grown both its profit and revenue over the last three years, as you can see in the chart below.

See our latest analysis for RPG Life Sciences

Not all profits are equal, and we can learn more about the nature of a company's past profitability by diving deeper into the financial statements. This article will discuss how unusual items have impacted RPG Life Sciences's most recent profit results. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of RPG Life Sciences.

The Impact Of Unusual Items On Profit

Importantly, our data indicates that RPG Life Sciences's profit was reduced by ₹53m, due to unusual items, over the last year. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. If RPG Life Sciences doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Our Take On RPG Life Sciences's Profit Performance

Unusual items (expenses) detracted from RPG Life Sciences's earnings over the last year, but we might see an improvement next year. Because of this, we think RPG Life Sciences's earnings potential is at least as good as it seems, and maybe even better! Better yet, its EPS are growing strongly, which is nice to see. 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. So while earnings quality is important, it's equally important to consider the risks facing RPG Life Sciences at this point in time. Case in point: We've spotted 3 warning signs for RPG Life Sciences you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of RPG Life Sciences's 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. 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 that insiders are buying to be useful.

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This article by Simply Wall St is general in nature. 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. Thank you for reading.