India Motor Parts & Accessories' (NSE:IMPAL) Profits May Not Reveal Underlying Issues

India Motor Parts & Accessories Limited's (NSE:IMPAL) robust recent earnings didn't do much to move the stock. However the statutory profit number doesn't tell the whole story, and we have found some factors which might be of concern to shareholders.

Check out our latest analysis for India Motor Parts & Accessories

How Do Unusual Items Influence Profit?

For anyone who wants to understand India Motor Parts & Accessories' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₹122m worth of unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. Which is hardly surprising, given the name. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of India Motor Parts & Accessories.

Our Take On India Motor Parts & Accessories' Profit Performance

Arguably, India Motor Parts & Accessories' statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that India Motor Parts & Accessories' true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 40% per annum growth in EPS for the last three. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Case in point: We've spotted 1 warning sign for India Motor Parts & Accessories you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of India Motor Parts & Accessories' 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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com