Balaji Telefilms' (NSE:BALAJITELE) Solid Profits Have Weak Fundamentals

Investors were disappointed with Balaji Telefilms Limited's (NSE:BALAJITELE) earnings, despite the strong profit numbers. Our analysis uncovered some concerning factors that we believe the market might be paying attention to.

See our latest analysis for Balaji Telefilms

The Impact Of Unusual Items On Profit

For anyone who wants to understand Balaji Telefilms' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₹42m worth of 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. And that's as you'd expect, given these boosts are described as 'unusual'. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

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

Our Take On Balaji Telefilms' Profit Performance

Arguably, Balaji Telefilms' statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Balaji Telefilms' statutory profits are better than its underlying earnings power. The good news is that it earned a profit in the last twelve months, despite its previous loss. 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 Balaji Telefilms as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 1 warning sign for Balaji Telefilms you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Balaji Telefilms' 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. 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.