Does Suprajit Engineering's (NSE:SUPRAJIT) Statutory Profit Adequately Reflect Its Underlying Profit?

Statistically speaking, it is less risky to invest in profitable companies than in 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. Today we'll focus on whether this year's statutory profits are a good guide to understanding Suprajit Engineering (NSE:SUPRAJIT).

It's good to see that over the last twelve months Suprajit Engineering made a profit of ₹677.2m on revenue of ₹14.2b. The chart below shows how it has grown revenue over the last three years, but that profit has declined.

See our latest analysis for Suprajit Engineering

Importantly, statutory profits are not always the best tool for understanding a company's true earnings power, so it's well worth examining profits in a little more detail. This article will focus on the impact unusual items have had on Suprajit Engineering's statutory earnings. 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.

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Suprajit Engineering's profit was reduced by ₹174m, 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 that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Suprajit Engineering to produce a higher profit next year, all else being equal.

Our Take On Suprajit Engineering's Profit Performance

Because unusual items detracted from Suprajit Engineering's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Suprajit Engineering's statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back over the last year. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example - Suprajit Engineering has 1 warning sign we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Suprajit Engineering'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.
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