We Think You Should Be Aware Of Some Concerning Factors In Hitech's (NSE:HITECHCORP) Earnings

Simply Wall St
May 30, 2021
Source: Shutterstock

Hitech Corporation Limited's (NSE:HITECHCORP ) stock didn't jump after it announced some healthy earnings. We think that investors might be worried about some concerning underlying factors.

Check out our latest analysis for Hitech

NSEI:HITECHCORP Earnings and Revenue History May 31st 2021

How Do Unusual Items Influence Profit?

For anyone who wants to understand Hitech's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₹56m 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 crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And, after all, that's exactly what the accounting terminology implies. 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 Hitech.

Our Take On Hitech's Profit Performance

We'd posit that Hitech's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Hitech's statutory profits are better than its underlying earnings power. But the good news is that its EPS growth over the last three years has been very impressive. 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. If you want to do dive deeper into Hitech, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 6 warning signs for Hitech (of which 2 are a bit unpleasant!) you should know about.

Today we've zoomed in on a single data point to better understand the nature of Hitech's 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. 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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