Tokyo Radiator Mfg.Co.Ltd's (TSE:7235) Strong Earnings Are Of Good Quality

Tokyo Radiator Mfg.Co.,Ltd. (TSE:7235) just reported healthy earnings but the stock price didn't move much. We think that investors have missed some encouraging factors underlying the profit figures.

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The Impact Of Unusual Items On Profit

Importantly, our data indicates that Tokyo Radiator Mfg.Co.Ltd's profit was reduced by JP¥272m, due to unusual items, over the last year. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. If Tokyo Radiator Mfg.Co.Ltd 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 Tokyo Radiator Mfg.Co.Ltd.

Our Take On Tokyo Radiator Mfg.Co.Ltd's Profit Performance

Unusual items (expenses) detracted from Tokyo Radiator Mfg.Co.Ltd's earnings over the last year, but we might see an improvement next year. Because of this, we think Tokyo Radiator Mfg.Co.Ltd's earnings potential is at least as good as it seems, and maybe even better! And the EPS is up 11% over the last twelve months. 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. If you want to do dive deeper into Tokyo Radiator Mfg.Co.Ltd, you'd also look into what risks it is currently facing. For example - Tokyo Radiator Mfg.Co.Ltd has 2 warning signs we think you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Tokyo Radiator Mfg.Co.Ltd'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.