Nath Bio-Genes (India)'s (NSE:NATHBIOGEN) Solid Earnings May Rest On Weak Foundations

Nath Bio-Genes (India) Limited's (NSE:NATHBIOGEN) robust recent earnings didn't do much to move the stock. We think this is due to investors looking beyond the statutory profits and being concerned with what they see.

See our latest analysis for Nath Bio-Genes (India)

The Impact Of Unusual Items On Profit

For anyone who wants to understand Nath Bio-Genes (India)'s profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₹34m 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. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. 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 Nath Bio-Genes (India).

Our Take On Nath Bio-Genes (India)'s Profit Performance

Arguably, Nath Bio-Genes (India)'s statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Nath Bio-Genes (India)'s statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 13% EPS growth 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For instance, we've identified 3 warning signs for Nath Bio-Genes (India) (1 is concerning) you should be familiar with.

Today we've zoomed in on a single data point to better understand the nature of Nath Bio-Genes (India)'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 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com