Torrent Pharmaceuticals' (NSE:TORNTPHARM) Soft Earnings Don't Show The Whole Picture

The market shrugged off the recent earnings report from Torrent Pharmaceuticals Limited (NSE:TORNTPHARM), despite the profit numbers being soft. We think that investors might be looking at some positive factors beyond the earnings numbers.

See our latest analysis for Torrent Pharmaceuticals

The Impact Of Unusual Items On Profit

To properly understand Torrent Pharmaceuticals' profit results, we need to consider the ₹4.9b expense attributed 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. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. 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 Torrent Pharmaceuticals 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 Torrent Pharmaceuticals' Profit Performance

Because unusual items detracted from Torrent Pharmaceuticals' earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Torrent Pharmaceuticals' earnings potential is at least as good as it seems, and maybe even better! Better yet, its EPS are growing strongly, which is nice to see. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, we've discovered 4 warning signs that you should run your eye over to get a better picture of Torrent Pharmaceuticals.

This note has only looked at a single factor that sheds light on the nature of Torrent Pharmaceuticals' 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 that insiders are buying.

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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.