We're Not Counting On Maithan Alloys (NSE:MAITHANALL) To Sustain Its Statutory Profitability

Broadly speaking, profitable businesses are less risky than unprofitable ones. However, sometimes companies receive a one-off boost (or reduction) to their profit, and it's not always clear whether statutory profits are a good guide, going forward. In this article, we'll look at how useful this year's statutory profit is, when analysing Maithan Alloys (NSE:MAITHANALL).

It's good to see that over the last twelve months Maithan Alloys made a profit of ₹2.18b on revenue of ₹15.5b. Below, you can see that both its revenue and its profit have fallen over the last three years.

See our latest analysis for Maithan Alloys

Of course, it is only sensible to look beyond the statutory profits and question how well those numbers represent the sustainable earnings power of the business. This article will discuss how unusual items have impacted Maithan Alloys' most recent profit results. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Maithan Alloys.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Maithan Alloys' profit received a boost of ₹470m in 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. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. If Maithan Alloys doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Our Take On Maithan Alloys' Profit Performance

Arguably, Maithan Alloys' statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Maithan Alloys' true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased in the last year. 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. 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. Every company has risks, and we've spotted 2 warning signs for Maithan Alloys you should know about.

This note has only looked at a single factor that sheds light on the nature of Maithan Alloys' 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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

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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.
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