Balrampur Chini Mills' (NSE:BALRAMCHIN) Anemic Earnings Might Be Worse Than You Think

Balrampur Chini Mills Limited's (NSE:BALRAMCHIN) recent weak earnings report didn't cause a big stock movement. However, we believe that investors should be aware of some underlying factors which may be of concern.

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How Do Unusual Items Influence Profit?

For anyone who wants to understand Balrampur Chini Mills' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₹702m worth of unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. If Balrampur Chini Mills doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current 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 Balrampur Chini Mills' Profit Performance

We'd posit that Balrampur Chini Mills' statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Balrampur Chini Mills' statutory profits are better than its underlying earnings power. Nonetheless, it's still worth noting that its earnings per share have grown at 42% over the last three years. 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 Balrampur Chini Mills, you'd also look into what risks it is currently facing. At Simply Wall St, we found 1 warning sign for Balrampur Chini Mills and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of Balrampur Chini Mills' 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 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.