The recent earnings posted by Asti Corporation (TSE:6899) were solid, but the stock didn't move as much as we expected. However the statutory profit number doesn't tell the whole story, and we have found some factors which might be of concern to shareholders.
Check out our latest analysis for Asti
The Impact Of Unusual Items On Profit
For anyone who wants to understand Asti's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from JP¥247m worth of unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And that's as you'd expect, given these boosts are described as 'unusual'. If Asti doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Asti.
Our Take On Asti's Profit Performance
Arguably, Asti's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Asti's true underlying earnings power is actually less than its statutory profit. But the good news is that its EPS growth over the last three years has been very impressive. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For example, we've discovered 3 warning signs that you should run your eye over to get a better picture of Asti.
This note has only looked at a single factor that sheds light on the nature of Asti'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. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful.
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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.
About TSE:6899
Asti
Engages in the manufacture and sale of electrical equipment for cars in Japan.
Moderate, good value and pays a dividend.
