Hindustan Oil Exploration's (NSE:HINDOILEXP) Shareholders May Want To Dig Deeper Than Statutory Profit

The recent earnings posted by Hindustan Oil Exploration Company Limited (NSE:HINDOILEXP) were solid, but the stock didn't move as much as we expected. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers.

See our latest analysis for Hindustan Oil Exploration

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Hindustan Oil Exploration's profit received a boost of ₹329m 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. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And that's as you'd expect, given these boosts are described as 'unusual'. If Hindustan Oil Exploration doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Hindustan Oil Exploration.

Our Take On Hindustan Oil Exploration's Profit Performance

Arguably, Hindustan Oil Exploration's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Hindustan Oil Exploration's statutory profits are better than its underlying earnings power. But the good news is that its EPS growth over the last three years has been very impressive. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. Just as investors must consider earnings, it is also important to take into account the strength of a company's balance sheet. You can see our latest analysis on Hindustan Oil Exploration's balance sheet health here.

Today we've zoomed in on a single data point to better understand the nature of Hindustan Oil Exploration'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. 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 with significant insider holdings 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.