# Earnings Quality Five Lines

_Systematic Investing . 2026-06-12 . By Tanmay Kurtkoti. Educational, illustrative, not advice._

A midcap's Q4 press release landed in a group chat I am on yesterday evening. Profit up 25 pct. By the time the chat finished congratulating itself, the stock had gapped up.

I did the boring thing. Opened the actual results filing and read five lines below the headline.

Line one, other income: a Rs 40 cr gain on a land sale. Happens once. Line two, the tax line: a Rs 25 cr deferred tax write-back, effective rate down from 25 to 19 pct. Line three, depreciation: useful life of the plant stretched from 10 to 15 years, which quietly added Rs 20 cr to profit without a single extra unit sold.

Strip those three. The headline Rs 500 cr becomes Rs 415 cr against last year's Rs 400 cr. The 25 pct growth is 3.8 pct.

Lines four and five test what is left. Receivable days went from 54 to 78, so a chunk of the quarter's sales are still promises. Cash from operations came in at Rs 290 cr against Rs 500 cr of reported profit. Conversion of 0.58. Even the 3.8 was booked faster than it was collected.

(The company here is illustrative. The five lines are not. They sit in every results filing in the same places.)

Three rules from my desk. The headline is chosen and the notes are mandatory, so read the filing, not the quote. A line that cannot repeat is not growth, strip it before you compare years. Receivable days crack before earnings do. Days first, conversion second, headline last.

A press release is written to be quoted. A filing is written to be checked. Quote nothing you have not checked.

How to read results filings line by line: