Sportking India's (NSE:SPORTKING) Soft Earnings Don't Show The Whole Picture

Soft earnings didn't appear to concern Sportking India Limited's (NSE:SPORTKING) shareholders over the last week. We did some digging, and we believe the earnings are stronger than they seem.

View our latest analysis for Sportking India

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Sportking India's profit was reduced by ₹297m, due to unusual items, over the last year. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Sportking India to produce a higher profit next year, all else being equal.

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

Our Take On Sportking India's Profit Performance

Because unusual items detracted from Sportking India's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Sportking India's statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at an extremely impressive rate over the last three years. 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. Every company has risks, and we've spotted 2 warning signs for Sportking India you should know about.

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

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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.