Despite posting some strong earnings, the market for Shiva Texyarn Limited's (NSE:SHIVATEX) stock hasn't moved much. Our analysis suggests that this might be because shareholders have noticed some concerning underlying factors.
How Do Unusual Items Influence Profit?
Importantly, our data indicates that Shiva Texyarn's profit received a boost of ₹60m in unusual items, over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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. Which is hardly surprising, given the name. 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 Shiva Texyarn.
Our Take On Shiva Texyarn's Profit Performance
We'd posit that Shiva Texyarn'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 Shiva Texyarn'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. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Our analysis shows 6 warning signs for Shiva Texyarn (2 are significant!) and we strongly recommend you look at these bad boys before investing.
Today we've zoomed in on a single data point to better understand the nature of Shiva Texyarn'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.
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.
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