We Think You Should Be Aware Of Some Concerning Factors In Sun TV Network's (NSE:SUNTV) Earnings

The stock price didn't jump after Sun TV Network Limited (NSE:SUNTV) posted decent earnings last week. Our analysis showed that there are some concerning factors in the earnings that investors may be cautious of.

See our latest analysis for Sun TV Network

The Power Of Non-Operating Revenue

Most companies divide classify their revenue as either 'operating revenue', which comes from normal operations, and other revenue, which could include government grants, for example. Generally speaking, operating revenue is a more reliable guide to the sustainable revenue generating capacity of the business. Importantly, the non-operating revenue often comes without associated ongoing costs, so it can boost profit by letting it fall straight to the bottom line, making the operating business seem better than it really is. It's worth noting that Sun TV Network saw a big increase in non-operating revenue over the last year. In fact, our data indicates that non-operating revenue increased from ₹6.90m to ₹5.05b. If that non-operating revenue fails to manifest in the current year, then there's a real risk the bottom line profit result will be impacted negatively. Sometimes, you can get a better idea of the underlying earnings potential of a company by excluding unusual boosts to non-operating revenue.

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 Sun TV Network's Profit Performance

Because Sun TV Network's non-operating revenue spiked quite noticeably last year, you could argue that a focus on statutory profit would be too generous because profits may drop back in the future (when that non-operating revenue is not repeated). For this reason, we think that Sun TV Network's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. Nonetheless, it's still worth noting that its earnings per share have grown at 26% over the last three years. 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. 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 1 warning sign for Sun TV Network you should know about.

Today we've zoomed in on a single data point to better understand the nature of Sun TV Network'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.