Gujarat Ambuja Exports (NSE:GAEL) Strong Profits May Be Masking Some Underlying Issues

The market for Gujarat Ambuja Exports Limited's (NSE:GAEL) stock was strong after it released a healthy earnings report last week. Despite this, our analysis suggests that there are some factors weakening the foundations of those good profit numbers.

Check out our latest analysis for Gujarat Ambuja Exports

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Gujarat Ambuja Exports' profit received a boost of ₹795m in unusual items, over the last year. 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 that's as you'd expect, given these boosts are described as 'unusual'. 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).

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 Gujarat Ambuja Exports' Profit Performance

We'd posit that Gujarat Ambuja Exports' 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 Gujarat Ambuja Exports' statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 11% EPS growth in the last year. 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'd like to know more about Gujarat Ambuja Exports as a business, it's important to be aware of any risks it's facing. At Simply Wall St, we found 1 warning sign for Gujarat Ambuja Exports and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of Gujarat Ambuja Exports' profit. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. 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.