Should You Use Greenply Industries's (NSE:GREENPLY) Statutory Earnings To Analyse It?

As a general rule, we think profitable companies are less risky than companies that lose money. 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 Greenply Industries's (NSE:GREENPLY) statutory profits are a good guide to its underlying earnings.

It's good to see that over the last twelve months Greenply Industries made a profit of ₹472.5m on revenue of ₹14.2b. In the last few years both its revenue and its profit have fallen, as you can see in the chart below.

Check out our latest analysis for Greenply Industries

Of course, it is only sensible to look beyond the statutory profits and question how well those numbers represent the sustainable earnings power of the business. This article will focus on the impact unusual items have had on Greenply Industries' statutory earnings. 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.

The Impact Of Unusual Items On Profit

To properly understand Greenply Industries' profit results, we need to consider the ₹499.7m expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Greenply Industries to produce a higher profit next year, all else being equal.

Our Take On Greenply Industries's Profit Performance

Unusual items (expenses) detracted from Greenply Industries's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Greenply Industries's statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. 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. Case in point: We've spotted 3 warning signs for Greenply Industries you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Greenply Industries' 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 that insiders are buying.

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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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