Rama Steel Tubes' (NSE:RAMASTEEL) Sluggish Earnings Might Be Just The Beginning Of Its Problems

Investors were disappointed by Rama Steel Tubes Limited's (NSE:RAMASTEEL ) latest earnings release. Our analysis has found some reasons to be concerned, beyond the weak headline numbers.

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In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. Rama Steel Tubes expanded the number of shares on issue by 5.3% over the last year. That means its earnings are split among a greater number of shares. Per share metrics like EPS help us understand how much actual shareholders are benefitting from the company's profits, while the net income level gives us a better view of the company's absolute size. You can see a chart of Rama Steel Tubes' EPS by clicking here.

How Is Dilution Impacting Rama Steel Tubes' Earnings Per Share (EPS)?

Rama Steel Tubes' net profit dropped by 15% per year over the last three years. And even focusing only on the last twelve months, we see profit is down 26%. Sadly, earnings per share fell further, down a full 22% in that time. So you can see that the dilution has had a bit of an impact on shareholders.

If Rama Steel Tubes' EPS can grow over time then that drastically improves the chances of the share price moving in the same direction. But on the other hand, we'd be far less excited to learn profit (but not EPS) was improving. For the ordinary retail shareholder, EPS is a great measure to check your hypothetical "share" of the company's profit.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Rama Steel Tubes.

The Impact Of Unusual Items On Profit

Alongside that dilution, it's also important to note that Rama Steel Tubes' profit was boosted by unusual items worth ₹84m in the last twelve months. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. We can see that Rama Steel Tubes' positive unusual items were quite significant relative to its profit in the year to September 2025. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Our Take On Rama Steel Tubes' Profit Performance

To sum it all up, Rama Steel Tubes got a nice boost to profit from unusual items; without that, its statutory results would have looked worse. And furthermore, it went and issued plenty of new shares, ensuring that each shareholder (who did not tip more money in) now owns a smaller proportion of the company. For the reasons mentioned above, we think that a perfunctory glance at Rama Steel Tubes' statutory profits might make it look better than it really is on an underlying level. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Every company has risks, and we've spotted 2 warning signs for Rama Steel Tubes you should know about.

Our examination of Rama Steel Tubes has focussed on certain factors that can make its earnings look better than they are. And, on that basis, we are somewhat skeptical. 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.