We Think That There Are Some Issues For Wendt (India) (NSE:WENDT) Beyond Its Promising Earnings

Wendt (India) Limited's (NSE:WENDT) healthy profit numbers didn't contain any surprises for investors. We think this is due to investors looking beyond the statutory profits and being concerned with what they see.

Check out our latest analysis for Wendt (India)

The Impact Of Unusual Items On Profit

For anyone who wants to understand Wendt (India)'s profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₹17m 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. And that's as you'd expect, given these boosts are described as 'unusual'. 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).

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

Our Take On Wendt (India)'s Profit Performance

Arguably, Wendt (India)'s statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Wendt (India)'s true underlying earnings power is actually less than its statutory profit. The good news is that, its earnings per share increased by 27% 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. So while earnings quality is important, it's equally important to consider the risks facing Wendt (India) at this point in time. For example, Wendt (India) has 3 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

Today we've zoomed in on a single data point to better understand the nature of Wendt (India)'s profit. But there are plenty of other ways to inform your opinion of a company. 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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