Bharti Airtel's (NSE:BHARTIARTL) Earnings Are Weaker Than They Seem

Bharti Airtel Limited (NSE:BHARTIARTL) announced strong profits, but the stock was stagnant. Our analysis suggests that this might be because shareholders have noticed some concerning underlying factors.

View our latest analysis for Bharti Airtel

The Impact Of Unusual Items On Profit

For anyone who wants to understand Bharti Airtel's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from ₹41b worth of 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 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. And that's as you'd expect, given these boosts are described as 'unusual'. 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).

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On Bharti Airtel's Profit Performance

Arguably, Bharti Airtel's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Bharti Airtel's true underlying earnings power is actually less than its statutory profit. But the good news is that its EPS growth over the last three years has been very impressive. 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. If you'd like to know more about Bharti Airtel as a business, it's important to be aware of any risks it's facing. For instance, we've identified 2 warning signs for Bharti Airtel (1 is potentially serious) you should be familiar with.

This note has only looked at a single factor that sheds light on the nature of Bharti Airtel's 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.