Sumit Woods (NSE:SUMIT) Is Posting Promising Earnings But The Good News Doesn’t Stop There

Sumit Woods Limited's (NSE:SUMIT) solid earnings announcement recently didn't do much to the stock price. Our analysis suggests that shareholders might be missing some positive underlying factors in the earnings report.

See our latest analysis for Sumit Woods

How Do Unusual Items Influence Profit?

For anyone who wants to understand Sumit Woods' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by ₹50m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Sumit Woods to produce a higher profit next year, all else being equal.

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

Our Take On Sumit Woods' Profit Performance

Unusual items (expenses) detracted from Sumit Woods' earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Sumit Woods' statutory profit actually understates its earnings potential! And the EPS is up 18% over the last twelve months. 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. If you'd like to know more about Sumit Woods as a business, it's important to be aware of any risks it's facing. For example, Sumit Woods has 4 warning signs (and 1 which shouldn't be ignored) we think you should know about.

Today we've zoomed in on a single data point to better understand the nature of Sumit Woods' 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.