Some May Be Optimistic About Furukawa Battery's (TSE:6937) Earnings

Shareholders appeared unconcerned with The Furukawa Battery Co., Ltd.'s (TSE:6937) lackluster earnings report last week. We think that the softer headline numbers might be getting counterbalanced by some positive underlying factors.

Our free stock report includes 2 warning signs investors should be aware of before investing in Furukawa Battery. Read for free now.

How Do Unusual Items Influence Profit?

For anyone who wants to understand Furukawa Battery's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by JP¥2.4b 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. Furukawa Battery took a rather significant hit from unusual items in the year to March 2025. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be.

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

Our Take On Furukawa Battery's Profit Performance

As we discussed above, we think the significant unusual expense will make Furukawa Battery's statutory profit lower than it would otherwise have been. Based on this observation, we consider it possible that Furukawa Battery's statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back over the last year. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. So while earnings quality is important, it's equally important to consider the risks facing Furukawa Battery at this point in time. Our analysis shows 2 warning signs for Furukawa Battery (1 makes us a bit uncomfortable!) and we strongly recommend you look at them before investing.

Today we've zoomed in on a single data point to better understand the nature of Furukawa Battery's profit. But there are plenty of other ways to inform your opinion of a company. 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. 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.