Why Yamato's (TSE:1967) Shaky Earnings Are Just The Beginning Of Its Problems

The market rallied behind Yamato Corporation's (TSE:1967) stock, leading do a rise in the share price after its recent weak earnings report. We think that shareholders might be missing some concerning factors that our analysis found.

Check out our latest analysis for Yamato

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Yamato's profit received a boost of JP¥230m 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. 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. Which is hardly surprising, given the name. If Yamato 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 Yamato.

Our Take On Yamato's Profit Performance

Arguably, Yamato's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Yamato's true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased in 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. If you'd like to know more about Yamato as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 1 warning sign for Yamato you should be aware of.

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