Statutory Profit Doesn't Reflect How Good Bajel Projects' (NSE:BAJEL) Earnings Are

Even though Bajel Projects Limited's (NSE:BAJEL) recent earnings release was robust, the market didn't seem to notice. We think that investors have missed some encouraging factors underlying the profit figures.

Check out our latest analysis for Bajel Projects

The Impact Of Unusual Items On Profit

To properly understand Bajel Projects' profit results, we need to consider the ₹75m expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Bajel Projects 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 Bajel Projects.

Our Take On Bajel Projects' Profit Performance

Because unusual items detracted from Bajel Projects' earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Bajel Projects' earnings potential is at least as good as it seems, and maybe even better! And it's also positive that the company showed enough improvement to book a profit this year, after losing money last year. 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. So while earnings quality is important, it's equally important to consider the risks facing Bajel Projects at this point in time. Case in point: We've spotted 2 warning signs for Bajel Projects you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Bajel Projects' 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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.