Mangalam Alloys' (NSE:MAL) Shareholders May Want To Dig Deeper Than Statutory Profit

The market shrugged off Mangalam Alloys Limited's (NSE:MAL) solid earnings report. Our analysis showed that there are some concerning factors in the earnings that investors may be cautious of.

View our latest analysis for Mangalam Alloys

An Unusual Tax Situation

We can see that Mangalam Alloys received a tax benefit of ₹34m. This is meaningful because companies usually pay tax rather than receive tax benefits. Of course, prima facie it's great to receive a tax benefit. However, our data indicates that tax benefits can temporarily boost statutory profit in the year it is booked, but subsequently profit may fall back. In the likely event the tax benefit is not repeated, we'd expect to see its statutory profit levels drop, at least in the absence of strong growth.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Mangalam Alloys.

Our Take On Mangalam Alloys' Profit Performance

As we have already discussed Mangalam Alloys reported that it received a tax benefit, rather than paying tax, in the last year. As a result we don't think its profit result, which includes that tax-boost, is a good guide to its sustainable profit levels. Because of this, we think that it may be that Mangalam Alloys' statutory profits are better than its underlying earnings power. In further bad news, its earnings per share decreased in the last year. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, Mangalam Alloys has 3 warning signs (and 1 which is concerning) we think you should know about.

Today we've zoomed in on a single data point to better understand the nature of Mangalam Alloys' profit. But there are plenty of other ways to inform your opinion of a company. 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.