Coromandel International's (NSE:COROMANDEL) Earnings Are Weaker Than They Seem

Despite posting some strong earnings, the market for Coromandel International Limited's (NSE:COROMANDEL) stock hasn't moved much. Our analysis suggests that shareholders have noticed something concerning in the numbers.

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The Impact Of Unusual Items On Profit

For anyone who wants to understand Coromandel International's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₹3.5b worth of unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. 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 Coromandel International's Profit Performance

Arguably, Coromandel International's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Coromandel International's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 35% per annum growth in EPS for the last three. 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 Coromandel International as a business, it's important to be aware of any risks it's facing. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Coromandel International.

This note has only looked at a single factor that sheds light on the nature of Coromandel International'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. 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.