Elite Pharmaceuticals Inc (ELTP)

[no2koolaid]

Again, the maniacal focus on revenues is the problem. Revenues are the TOP LINE not the BOTTOM LINE. So, how about a little Business 101?

A quick look at the income sheet provides a clear understanding of where the focus should be. So, let’s look at Elite’s income statements from 2021 Q1 and Q2…

In Q1 they had total revenues of $7,538,744 and a net profit of $830,600. In Q2 they had total revenues of $7,399,892 - a reduction of 1.8% - and they had a net profit of $2,484,062 – an increase of 2.99X.

Since repetition is the mother’s milk of learning, let me repeat that point…Q2 had an increase in profit of nearly 3X despite a 1.8% reduction in revenues!

Now, let me ask two questions:
1) Which Q should the investor prefer?
2) Why?

The answers are layups…
1) Q2
2) Because the company has more revenues flowing to the BOTTOM LINE and that is indicative of a more efficient business; one unencumbered by debt.

In the business world, gross revenues are the TOP LINE. Along the path to the BOTTOM LINE are costs, enough of which can turn a high revenue generator into a losing business. It is why we hear executives say, “Give me the BOTTOM LINE.” It is why the term – The BOTTOM LINE – is so meaningful. The BOTTOM LINE is what matters. The BOTTOM LINE is evidence of an effective AND efficient business. The BOTTOM LINE is where the profit or loss is reflected. FOR ELITE, THE BOTTOM LINE SHOWS A NEAR 3X INCREASE IN PROFIT OVER THE PREVIOUS QUARTER.

HOW IS THAT A PROBLEM? AND, GIVEN HOW CRYSTAL CLEAR THAT IS, HOW CAN IT POSSIBLY BE MISAPPREHENDED?