There May Be Some Bright Spots In S H Kelkar's (NSE:SHK) Earnings

The market was pleased with the recent earnings report from S H Kelkar and Company Limited (NSE:SHK), despite the profit numbers being soft. Our analysis suggests that investors may have noticed some promising signs beyond the statutory profit figures.

Our free stock report includes 4 warning signs investors should be aware of before investing in S H Kelkar. Read for free now.

How Do Unusual Items Influence Profit?

For anyone who wants to understand S H Kelkar's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by ₹606m due to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. 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 S H Kelkar to produce a higher profit next year, all else being equal.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On S H Kelkar's Profit Performance

Because unusual items detracted from S H Kelkar's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that S H Kelkar's statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Case in point: We've spotted 4 warning signs for S H Kelkar you should be mindful of and 1 of these is significant.

This note has only looked at a single factor that sheds light on the nature of S H Kelkar'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.