Orient Ceratech's (NSE:ORIENTCER) Sluggish Earnings Might Be Just The Beginning Of Its Problems

Investors were disappointed by Orient Ceratech Limited's (NSE:ORIENTCER ) latest earnings release. We did some analysis, and found that there are some reasons to be cautious about the headline numbers.

Check out our latest analysis for Orient Ceratech

How Do Unusual Items Influence Profit?

To properly understand Orient Ceratech's profit results, we need to consider the ₹24m gain attributed to unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. 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 Orient Ceratech doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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

Our Take On Orient Ceratech's Profit Performance

We'd posit that Orient Ceratech'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 Orient Ceratech's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 34% per annum growth in EPS for the last three. 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'd like to know more about Orient Ceratech as a business, it's important to be aware of any risks it's facing. To that end, you should learn about the 3 warning signs we've spotted with Orient Ceratech (including 1 which shouldn't be ignored).

This note has only looked at a single factor that sheds light on the nature of Orient Ceratech's 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. 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.