Are Gandhi Special Tubes's (NSE:GANDHITUBE) Statutory Earnings A Good Guide To Its Underlying Profitability?

It might be old fashioned, but we really like to invest in companies that make a profit, each and every year. However, sometimes companies receive a one-off boost (or reduction) to their profit, and it's not always clear whether statutory profits are a good guide, going forward. This article will consider whether Gandhi Special Tubes' (NSE:GANDHITUBE) statutory profits are a good guide to its underlying earnings.

It's good to see that over the last twelve months Gandhi Special Tubes made a profit of ₹202.0m on revenue of ₹758.9m. The chart below shows that both revenue and profit have declined over the last three years.

View our latest analysis for Gandhi Special Tubes

Of course, when it comes to statutory profit, the devil is often in the detail, and we can get a better sense for a company by diving deeper into the financial statements. This article will focus on the impact unusual items have had on Gandhi Special Tubes' statutory earnings. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Gandhi Special Tubes.

The Impact Of Unusual Items On Profit

For anyone who wants to understand Gandhi Special Tubes' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₹24m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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. If Gandhi Special Tubes doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Our Take On Gandhi Special Tubes' Profit Performance

Arguably, Gandhi Special Tubes' statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Gandhi Special Tubes' true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over the last twelve months. 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. So while earnings quality is important, it's equally important to consider the risks facing Gandhi Special Tubes at this point in time. For example - Gandhi Special Tubes has 1 warning sign we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Gandhi Special Tubes' 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 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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