Earnings Troubles May Signal Larger Issues for Dhampur Sugar Mills (NSE:DHAMPURSUG) Shareholders

Last week's earnings announcement from Dhampur Sugar Mills Limited (NSE:DHAMPURSUG) was disappointing to investors, with a sluggish profit figure. Our analysis has found some reasons to be concerned, beyond the weak headline numbers.

View our latest analysis for Dhampur Sugar Mills

How Do Unusual Items Influence Profit?

For anyone who wants to understand Dhampur Sugar Mills' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₹186m 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. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Dhampur Sugar Mills.

Our Take On Dhampur Sugar Mills' Profit Performance

Arguably, Dhampur Sugar Mills' statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Dhampur Sugar Mills' true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased in the last year. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Case in point: We've spotted 3 warning signs for Dhampur Sugar Mills you should be mindful of and 1 of these is potentially serious.

Today we've zoomed in on a single data point to better understand the nature of Dhampur Sugar Mills' 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.