AMJ Land Holdings (NSE:AMJLAND) Is Growing Earnings But Are They A Good Guide?

Statistically speaking, it is less risky to invest in profitable companies than in unprofitable ones. However, sometimes companies receive a one-off boost (or reduction) to their profit, and it's not always clear whether statutory profits are a good guide, going forward. Today we'll focus on whether this year's statutory profits are a good guide to understanding AMJ Land Holdings (NSE:AMJLAND).

We like the fact that AMJ Land Holdings made a profit of ₹116.2m on its revenue of ₹176.0m, in the last year. Even though its revenue is down over the last three years, its profit has actually increased, as you can see, below.

View our latest analysis for AMJ Land Holdings

Of course, when it comes to statutory profit, the devil is often in the detail, and we can get a better sense for a company by diving deeper into the financial statements. This article will discuss how unusual items have impacted AMJ Land Holdings' most recent profit results. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of AMJ Land Holdings.

The Impact Of Unusual Items On Profit

To properly understand AMJ Land Holdings' profit results, we need to consider the ₹55m gain attributed to 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. Which is hardly surprising, given the name. We can see that AMJ Land Holdings' positive unusual items were quite significant relative to its profit in the year to September 2020. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

Our Take On AMJ Land Holdings' Profit Performance

As we discussed above, we think the significant positive unusual item makes AMJ Land Holdings'earnings a poor guide to its underlying profitability. For this reason, we think that AMJ Land Holdings' statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. But on the bright side, its earnings per share have grown at an extremely impressive rate 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. If you want to do dive deeper into AMJ Land Holdings, you'd also look into what risks it is currently facing. At Simply Wall St, we found 5 warning signs for AMJ Land Holdings and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of AMJ Land Holdings' profit. But there are plenty of other ways to inform your opinion of a company. 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 that insiders are buying.

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This article by Simply Wall St is general in nature. 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.
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