NHK Spring's (TSE:5991) Earnings Are Weaker Than They Seem

Despite announcing strong earnings, NHK Spring Co., Ltd.'s (TSE:5991) stock was sluggish. We did some digging and found some worrying underlying problems.

Check out our latest analysis for NHK Spring

The Impact Of Unusual Items On Profit

Importantly, our data indicates that NHK Spring's profit received a boost of JP¥9.1b in unusual items, over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And, after all, that's exactly what the accounting terminology implies. If NHK Spring doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On NHK Spring's Profit Performance

We'd posit that NHK Spring's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that NHK Spring's statutory profits are better than its underlying earnings power. But the good news is that its EPS growth over the last three years has been very impressive. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. If you'd like to know more about NHK Spring as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 1 warning sign for NHK Spring you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of NHK Spring's 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.