Kokuyo Camlin's (NSE:KOKUYOCMLN) Earnings Are Of Questionable Quality

Despite posting some strong earnings, the market for Kokuyo Camlin Limited's (NSE:KOKUYOCMLN) stock hasn't moved much. We did some digging, and we found some concerning factors in the details.

See our latest analysis for Kokuyo Camlin

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Kokuyo Camlin's profit received a boost of ₹45m in unusual items, over the last year. 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 crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And that's as you'd expect, given these boosts are described as 'unusual'. If Kokuyo Camlin 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 Kokuyo Camlin.

Our Take On Kokuyo Camlin's Profit Performance

Arguably, Kokuyo Camlin's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Kokuyo Camlin's true underlying earnings power is actually less than its statutory profit. The good news is that, its earnings per share increased by 79% 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 if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Case in point: We've spotted 1 warning sign for Kokuyo Camlin you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Kokuyo Camlin's 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. 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 with significant insider holdings to be useful.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com