Taiyo KisokogyoLtd's (TSE:1758) Profits Appear To Have Quality Issues

The recent earnings posted by Taiyo Kisokogyo Co.,Ltd. (TSE:1758) were solid, but the stock didn't move as much as we expected. We think this is due to investors looking beyond the statutory profits and being concerned with what they see.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Taiyo KisokogyoLtd's profit received a boost of JP¥110m in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And, after all, that's exactly what the accounting terminology implies. Taiyo KisokogyoLtd had a rather significant contribution from unusual items relative to its profit to January 2025. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger 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 Taiyo KisokogyoLtd.

Our Take On Taiyo KisokogyoLtd's Profit Performance

As we discussed above, we think the significant positive unusual item makes Taiyo KisokogyoLtd's earnings a poor guide to its underlying profitability. For this reason, we think that Taiyo KisokogyoLtd's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. But at least holders can take some solace from the 6.7% EPS growth in the last year. 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. To help with this, we've discovered 3 warning signs (1 is potentially serious!) that you ought to be aware of before buying any shares in Taiyo KisokogyoLtd.

This note has only looked at a single factor that sheds light on the nature of Taiyo KisokogyoLtd'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.