Maruti Suzuki India's (NSE:MARUTI) Earnings Are Of Questionable Quality

Maruti Suzuki India Limited's (NSE:MARUTI) robust earnings report didn't manage to move the market for its stock. We did some digging, and we found some concerning factors in the details.

View our latest analysis for Maruti Suzuki India

The Impact Of Unusual Items On Profit

For anyone who wants to understand Maruti Suzuki India's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₹36b 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. Which is hardly surprising, given the name. 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).

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On Maruti Suzuki India's Profit Performance

Arguably, Maruti Suzuki India's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Maruti Suzuki India's true underlying earnings power is actually less than its statutory profit. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. 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. If you'd like to know more about Maruti Suzuki India as a business, it's important to be aware of any risks it's facing. For example - Maruti Suzuki India has 3 warning signs we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Maruti Suzuki India'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. 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.