There May Be Underlying Issues With The Quality Of Windlas Biotech's (NSE:WINDLAS) Earnings

Despite posting some strong earnings, the market for Windlas Biotech Limited's (NSE:WINDLAS) stock hasn't moved much. Our analysis suggests that this might be because shareholders have noticed some concerning underlying factors.

Check out our latest analysis for Windlas Biotech

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Windlas Biotech's profit received a boost of ₹108m in unusual items, over the last year. 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'. If Windlas Biotech doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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

Our Take On Windlas Biotech's Profit Performance

We'd posit that Windlas Biotech's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Windlas Biotech's statutory profits are better than its underlying earnings power. Nonetheless, it's still worth noting that its earnings per share have grown at 66% over the last three years. 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. While earnings are important, another area to consider is the balance sheet. You can see our latest analysis on Windlas Biotech's balance sheet health here.

Today we've zoomed in on a single data point to better understand the nature of Windlas Biotech's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. 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.