Devyani International's (NSE:DEVYANI) Soft Earnings Don't Show The Whole Picture

Soft earnings didn't appear to concern Devyani International Limited's (NSE:DEVYANI) shareholders over the last week. Our analysis suggests that while the profits are soft, the foundations of the business are strong.

View our latest analysis for Devyani International

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Devyani International's profit was reduced by ₹1.1b, due to unusual items, over the last year. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. 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 Devyani International doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming 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 Devyani International's Profit Performance

Because unusual items detracted from Devyani International's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Devyani International's earnings potential is at least as good as it seems, and maybe even better! On the other hand, its EPS actually shrunk in the last twelve months. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Every company has risks, and we've spotted 3 warning signs for Devyani International (of which 1 shouldn't be ignored!) you should know about.

Today we've zoomed in on a single data point to better understand the nature of Devyani International'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 with high insider ownership.

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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.