Are Career Point's (NSE:CAREERP) Statutory Earnings A Good Reflection Of Its Earnings Potential?

By
Simply Wall St
Published
February 11, 2021
NSEI:CAREERP
Source: Shutterstock

Many investors consider it preferable to invest in profitable companies over unprofitable ones, because profitability suggests a business is sustainable. Having said that, sometimes statutory profit levels are not a good guide to ongoing profitability, because some short term one-off factor has impacted profit levels. Today we'll focus on whether this year's statutory profits are a good guide to understanding Career Point (NSE:CAREERP).

It's good to see that over the last twelve months Career Point made a profit of ₹277.4m on revenue of ₹794.4m. As depicted below, while its revenue may have fallen over the last few years, its profit actually improved.

Check out our latest analysis for Career Point

earnings-and-revenue-history
NSEI:CAREERP Earnings and Revenue History February 12th 2021

Of course, it is only sensible to look beyond the statutory profits and question how well those numbers represent the sustainable earnings power of the business. This article will focus on the impact unusual items have had on Career Point's statutory earnings. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Career Point.

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Career Point's profit received a boost of ₹30m 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 analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's as you'd expect, given these boosts are described as 'unusual'. If Career Point doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Our Take On Career Point's Profit Performance

Arguably, Career Point's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Career Point's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 35% per annum growth in EPS for the last three. 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 want to do dive deeper into Career Point, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 3 warning signs for Career Point and you'll want to know about these.

Today we've zoomed in on a single data point to better understand the nature of Career Point's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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. 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. 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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