Gokaldas Exports' (NSE:GOKEX) Solid Earnings May Rest On Weak Foundations

Following the solid earnings report from Gokaldas Exports Limited (NSE:GOKEX), the market responded by bidding up the stock price. While the profit numbers were good, our analysis has found some concerning factors that shareholders should be aware of.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Gokaldas Exports' profit received a boost of ₹288m in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. If Gokaldas Exports doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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 Gokaldas Exports' Profit Performance

Arguably, Gokaldas Exports' statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Gokaldas Exports' true underlying earnings power is actually less than its statutory profit. The good news is that, its earnings per share increased by 6.9% in the last year. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. If you'd like to know more about Gokaldas Exports as a business, it's important to be aware of any risks it's facing. At Simply Wall St, we found 1 warning sign for Gokaldas Exports and we think they deserve your attention.

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

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

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.