December quarter earnings threw up no major surprise.

But the number of companies that beat estimates was higher compared with that in the previous quarter.

JM Financial says the beats-to-misses (BTM) ratio came in at 1.4 against 1.06 in September quarter.

At the profit after tax (PAT) level, consumer firms had the worst BTM ratio in December quarter while NBFC and financials had the best. Among major revival stories, some 30 companies reported their first quarterly profits in five quarters.

Syndicate Bank reported a net profit of Rs 108 crore for the quarter after five loss-making quarters.

It logged a net loss of Rs 1,542.54 crore in Q2FY19, Rs 1,281.77 crore in Q1FY19, Rs 2,195.12 crore in Q4FY18 and Rs 869.77 crore in Q3FY18.

Shree Renuka Sugars had a similar story.

The sugar firm posted Rs 68.60 crore profit for December after making losses for the previous four.

Earnings data since December 31, 2017 was considered for this article. G Chokkalingam, founder, Equinomics Research and Advisory, cautions that profitable earnings after many quarters of losses does not make it a ‘buy’ case immediately.

“Hold on for a while,” says he. “You need to verify whether the profit is on account of a turnaround in core business or due to any exceptional item.

Also, one needs to check if the improvement in operating profit was accompanied by an improvement in sales.

Only when one gains confidence on the improvement in business matrix, can one enter the stock provided the valuation multiple is significantly less than its historical one or lower than that of its peers,” Chokkalingam said. With a net profit of Rs 22.34 crore in Q3FY19, Punjab Sind Bank also managed to report profit after having reported losses between Rs 100 crore and Rs 550 crore in previous four quarters.

In the textile sector, Shri Dinesh Mills, Zodiac Clothing Company, Samtex Fashions, Super Spinning Mills and Jindal Cotex posted their first profits in five quarters, whereas Omkar Speciality scripted a similar story from the chemicals space. But do all of them turnaround stories Bebabrata Bhattacharjee, Head of Research at CapitalAim, says a single quarter earnings does not make it a turnaround story for a business.

“Investors should watch the numbers for at least two quarters.

If there is consistency and that shows on the growth fundamentals, can one consider it a turnaround story,” he said.

Among the companies that reported their first quarterly profits after many quarters also included DIC India, Jupiter Infomedia, Satra Properties, Aplab, SPEL Semiconductor, ARSS Infra, Prime Focus, Sanghvi Forging, Viceroy Hotels, Dhanada Corporation, Brightcom Group, Wintac, Cimmco, Global Offshore Services and BIL Energy. Shares of BIL Energy have jumped 21 per cent since January 2018, while others on the list declined up to 89 per cent during this period. Stocks like Viceroy Hotels, Omkar Speciality Chemicals, Cimmco, Global Offshore, Samtex Fashion, Super Spinning and SPEL Semiconductor dipped over 65 per cent between January 1, 2018 and February 15, 2019.

“Keep an eye on operating profit, sales volume and margins.

If the sales volume increases quarter on quarter (QoQ), then this can be taken as a turnaround or growth story.

Investors should check the background of the companies and if the sudden quarterly profit has come from an external source like sale of a non-core business or forex gains.

That would provide clarity about actual turnaround in a business,” Bhattacharjee said.