InfoBeans Technologies (NSE:INFOBEAN) Is Growing Earnings But Are They A Good Guide?

Broadly speaking, profitable businesses are less risky than unprofitable ones. Having said that, sometimes statutory profit levels are not a good guide to ongoing profitability, because some short term one-off factor has impacted profit levels. This article will consider whether InfoBeans Technologies' (NSE:INFOBEAN) statutory profits are a good guide to its underlying earnings.

We like the fact that InfoBeans Technologies made a profit of ₹217.9m on its revenue of ₹1.84b, in the last year. One positive is that it has grown both its profit and its revenue, over the last few years.

See our latest analysis for InfoBeans Technologies

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 focus on the impact unusual items have had on InfoBeans Technologies' statutory earnings. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of InfoBeans Technologies.

How Do Unusual Items Influence Profit?

To properly understand InfoBeans Technologies' profit results, we need to consider the ₹15m gain attributed to unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. 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).

Our Take On InfoBeans Technologies' Profit Performance

We'd posit that InfoBeans Technologies' statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that InfoBeans Technologies' true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 28% per annum growth in EPS for the last three. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Case in point: We've spotted 2 warning signs for InfoBeans Technologies you should be aware of.

This note has only looked at a single factor that sheds light on the nature of InfoBeans Technologies' 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 that insiders are buying to be useful.

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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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