Some May Be Optimistic About Nissan Motor's (TSE:7201) Earnings

The most recent earnings report from Nissan Motor Co., Ltd. (TSE:7201) was disappointing for shareholders. Despite the soft profit numbers, our analysis has optimistic about the overall quality of the income statement.

Check out our latest analysis for Nissan Motor

How Do Unusual Items Influence Profit?

For anyone who wants to understand Nissan Motor's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by JP¥103b 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. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. If Nissan Motor doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming 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 Nissan Motor's Profit Performance

Because unusual items detracted from Nissan Motor's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Nissan Motor's statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at an extremely impressive rate over the last three years. 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. So while earnings quality is important, it's equally important to consider the risks facing Nissan Motor at this point in time. Every company has risks, and we've spotted 4 warning signs for Nissan Motor (of which 1 can't be ignored!) you should know about.

Today we've zoomed in on a single data point to better understand the nature of Nissan Motor'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. 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.