Statutory Profit Doesn't Reflect How Good NGK Insulators' (TSE:5333) Earnings Are

NGK Insulators, Ltd.'s (TSE:5333) strong earnings report was rewarded with a positive stock price move. Our analysis found some more factors that we think are good for shareholders.

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The Impact Of Unusual Items On Profit

For anyone who wants to understand NGK Insulators' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by JP¥23b due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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. Assuming those unusual expenses don't come up again, we'd therefore expect NGK Insulators to produce a higher profit next year, all else being equal.

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 NGK Insulators' Profit Performance

Because unusual items detracted from NGK Insulators' earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think NGK Insulators' earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share increased by 12% 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. You'd be interested to know, that we found 2 warning signs for NGK Insulators and you'll want to know about these.

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