We Think That There Are More Issues For De Nora India (NSE:DENORA) Than Just Sluggish Earnings

The market wasn't impressed with the soft earnings from De Nora India Limited (NSE:DENORA) recently. We did some further digging and think they have a few more reasons to be concerned beyond the statutory profit.

View our latest analysis for De Nora India

The Impact Of Unusual Items On Profit

To properly understand De Nora India's profit results, we need to consider the ₹33m gain attributed to unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's as you'd expect, given these boosts are described as 'unusual'. If De Nora India doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of De Nora India.

Our Take On De Nora India's Profit Performance

We'd posit that De Nora India's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that De Nora India's statutory profits are better than its underlying earnings power. 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 want to do dive deeper into De Nora India, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 1 warning sign for De Nora India you should know about.

This note has only looked at a single factor that sheds light on the nature of De Nora India's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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 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.