Savita Oil Technologies' (NSE:SOTL) Shareholders May Want To Dig Deeper Than Statutory Profit

Savita Oil Technologies Limited's (NSE:SOTL ) stock didn't jump after it announced some healthy earnings. Our analysis showed that there are some concerning factors in the earnings that investors may be cautious of.

View our latest analysis for Savita Oil Technologies

How Do Unusual Items Influence Profit?

To properly understand Savita Oil Technologies' profit results, we need to consider the ₹558m gain attributed to unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And, after all, that's exactly what the accounting terminology implies. We can see that Savita Oil Technologies' positive unusual items were quite significant relative to its profit in the year to September 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Savita Oil Technologies.

Our Take On Savita Oil Technologies' Profit Performance

As previously mentioned, Savita Oil Technologies' large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. As a result, we think it may well be the case that Savita Oil Technologies' underlying earnings power is lower than its statutory profit. And we are pleased to note that EPS is at least heading in the right direction in the alst 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. If you'd like to know more about Savita Oil Technologies as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 2 warning signs for Savita Oil Technologies you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Savita Oil Technologies' 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.