Are Physicswallah Ltd latest results good or bad?

Physicswallah Ltd's latest financial results for Q3 FY26 indicate a notable operational turnaround, with the company achieving a net profit of ₹100.52 crores, marking a significant recovery from a loss of ₹120.45 crores in the previous quarter. This shift to profitability is underscored by a year-on-year growth in net profit of 125.68%, reflecting strong demand for its educational offerings despite the challenges in the edtech sector. The revenue for the quarter reached ₹1,082.42 crores, representing a year-on-year increase of 30.07% and a sequential growth of 2.97%. This consistent revenue growth highlights the company's ability to maintain its market position and brand strength. Additionally, the operating margin improved to 21.84%, up from 17.23% in the previous quarter, indicating enhanced cost management and operational efficiency. However, the results also reveal some underlying concerns. The company’s reliance on non-operating income, which accounted for a substantial portion of profit before tax, raises questions about the sustainability of its core operational profitability. Furthermore, the capital efficiency metrics remain a challenge, with a return on equity (ROE) of 0.0% and a return on capital employed (ROCE) of -164.26%, suggesting that the company has yet to generate adequate returns on its invested capital. In light of these results, Physicswallah experienced an adjustment in its evaluation, reflecting the complexities of its financial health and market positioning. As the company navigates the competitive edtech landscape, it will need to demonstrate sustained profitability and improved capital efficiency to bolster investor confidence and justify its current valuation.