Some Investors May Be Willing To Look Past Eveready Industries India's (NSE:EVEREADY) Soft Earnings

Shareholders appeared unconcerned with Eveready Industries India Limited's (NSE:EVEREADY) lackluster earnings report last week. Our analysis suggests that while the profits are soft, the foundations of the business are strong.

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How Do Unusual Items Influence Profit?

Importantly, our data indicates that Eveready Industries India's profit was reduced by ₹449m, due to unusual items, over the last year. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Eveready Industries India to produce a higher profit next year, all else being equal.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Eveready Industries India.

Our Take On Eveready Industries India's Profit Performance

Because unusual items detracted from Eveready Industries India's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Eveready Industries India's statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at an extremely impressive rate over the last three years. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Case in point: We've spotted 4 warning signs for Eveready Industries India you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Eveready Industries India's 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. 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.