Magadh Sugar & Energy's (NSE:MAGADSUGAR) Earnings Are Growing But Is There More To The Story?

It might be old fashioned, but we really like to invest in companies that make a profit, each and every year. That said, the current statutory profit is not always a good guide to a company's underlying profitability. This article will consider whether Magadh Sugar & Energy's (NSE:MAGADSUGAR) statutory profits are a good guide to its underlying earnings.

It's good to see that over the last twelve months Magadh Sugar & Energy made a profit of ₹657.9m on revenue of ₹9.77b. One positive is that it has grown both its profit and its revenue, over the last few years.

See our latest analysis for Magadh Sugar & Energy

Not all profits are equal, and we can learn more about the nature of a company's past profitability by diving deeper into the financial statements. This article will discuss how unusual items have impacted Magadh Sugar & Energy's most recent profit results. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Magadh Sugar & Energy.

The Impact Of Unusual Items On Profit

To properly understand Magadh Sugar & Energy's profit results, we need to consider the ₹182m gain attributed to unusual items. 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'. 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).

Our Take On Magadh Sugar & Energy's Profit Performance

Arguably, Magadh Sugar & Energy's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Magadh Sugar & Energy'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. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, Magadh Sugar & Energy has 4 warning signs (and 1 which shouldn't be ignored) we think you should know about.

This note has only looked at a single factor that sheds light on the nature of Magadh Sugar & Energy's 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. 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.
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