Statutory Profit Doesn't Reflect How Good Eagle IndustryLtd's (TSE:6486) Earnings Are

The subdued stock price reaction suggests that Eagle Industry Co.,Ltd.'s (TSE:6486) strong earnings didn't offer any surprises. Our analysis suggests that investors might be missing some promising details.

View our latest analysis for Eagle IndustryLtd

How Do Unusual Items Influence Profit?

For anyone who wants to understand Eagle IndustryLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by JP¥964m due to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. If Eagle IndustryLtd doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Eagle IndustryLtd.

Our Take On Eagle IndustryLtd's Profit Performance

Unusual items (expenses) detracted from Eagle IndustryLtd's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Eagle IndustryLtd's statutory profit actually understates its earnings potential! Better yet, its EPS are growing strongly, which is nice to see. 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. While it's very important to consider the profit and loss statement, you can also learn a lot about a company by looking at its balance sheet. You can see our latest analysis on Eagle IndustryLtd's balance sheet health here.

This note has only looked at a single factor that sheds light on the nature of Eagle IndustryLtd's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. 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.