TAJGVK Hotels & Resorts' (NSE:TAJGVK) Promising Earnings May Rest On Soft Foundations

TAJGVK Hotels & Resorts Limited (NSE:TAJGVK) announced strong profits, but the stock was stagnant. We did some digging, and we found some concerning factors in the details.

Check out the opportunities and risks within the IN Hospitality industry.

Operating Revenue Or Not?

At most companies, some revenue streams, such as government grants, are accounted for as non-operating revenue, while the core business is said to produce operating revenue. Generally speaking, operating revenue is a more reliable guide to the sustainable revenue generating capacity of the business. However, we note that when non-operating revenue increases suddenly, it will sometimes generate an unsustainable boost to profit. It's worth noting that TAJGVK Hotels & Resorts saw a big increase in non-operating revenue over the last year. In fact, our data indicates that non-operating revenue increased from ₹22.6m to ₹268.3m. If that non-operating revenue fails to manifest in the current year, then there's a real risk the bottom line profit result will be impacted negatively. Sometimes, you can get a better idea of the underlying earnings potential of a company by excluding unusual boosts to non-operating revenue.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of TAJGVK Hotels & Resorts.

Our Take On TAJGVK Hotels & Resorts' Profit Performance

As discussed above, TAJGVK Hotels & Resorts' sharp increase in non-operating revenue boosted its profit over the last year, and if that non-operating revenue is not repeated, then the trailing twelve months profit probably isn't as good as it seems. Therefore, it seems possible to us that TAJGVK Hotels & Resorts' true underlying earnings power is actually less than its statutory profit. The good news is that it earned a profit in the last twelve months, despite its previous loss. 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. If you want to do dive deeper into TAJGVK Hotels & Resorts, you'd also look into what risks it is currently facing. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of TAJGVK Hotels & Resorts.

Today we've zoomed in on a single data point to better understand the nature of TAJGVK Hotels & Resorts' 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. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying to be useful.

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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.