MMP Industries' (NSE:MMP) Soft Earnings Are Actually Better Than They Appear

Investors were disappointed with the weak earnings posted by MMP Industries Limited (NSE:MMP ). While the headline numbers were soft, we believe that investors might be missing some encouraging factors.

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The Impact Of Unusual Items On Profit

To properly understand MMP Industries' profit results, we need to consider the ₹174m expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect MMP Industries to produce a higher profit next year, all else being equal.

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

Our Take On MMP Industries' Profit Performance

Because unusual items detracted from MMP Industries' earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think MMP Industries' earnings potential is at least as good as it seems, and maybe even better! On the other hand, its EPS actually shrunk in 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Case in point: We've spotted 4 warning signs for MMP Industries you should be aware of.

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