Investors Can Find Comfort In Bando Chemical Industries' (TSE:5195) Earnings Quality

Bando Chemical Industries, Ltd.'s (TSE:5195) stock was strong despite it releasing a soft earnings report last week. However, we think the company is showing some signs that things are more promising than they seem.

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How Do Unusual Items Influence Profit?

Importantly, our data indicates that Bando Chemical Industries' profit was reduced by JP¥5.9b, due to unusual items, over the last year. 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. Bando Chemical Industries took a rather significant hit from unusual items in the year to June 2025. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

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 Bando Chemical Industries' Profit Performance

As we discussed above, we think the significant unusual expense will make Bando Chemical Industries' statutory profit lower than it would otherwise have been. Based on this observation, we consider it possible that Bando Chemical Industries' statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at 70% per year over the last three years. 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 Bando Chemical Industries as a business, it's important to be aware of any risks it's facing. For example, we've discovered 3 warning signs that you should run your eye over to get a better picture of Bando Chemical Industries.

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