There May Be Underlying Issues With The Quality Of Kawagishi Bridge Works' (TSE:5921) Earnings

Kawagishi Bridge Works Co., Ltd.'s (TSE:5921) robust earnings report didn't manage to move the market for its stock. Our analysis suggests that shareholders have noticed something concerning in the numbers.

See our latest analysis for Kawagishi Bridge Works

The Impact Of Unusual Items On Profit

For anyone who wants to understand Kawagishi Bridge Works' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from JP¥144m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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. If Kawagishi Bridge Works 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 Kawagishi Bridge Works.

Our Take On Kawagishi Bridge Works' Profit Performance

We'd posit that Kawagishi Bridge Works' statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Kawagishi Bridge Works' statutory profits are better than its underlying earnings power. Nonetheless, it's still worth noting that its earnings per share have grown at 6.8% over the last three years. 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. So while earnings quality is important, it's equally important to consider the risks facing Kawagishi Bridge Works at this point in time. Case in point: We've spotted 1 warning sign for Kawagishi Bridge Works you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Kawagishi Bridge Works' 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. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful.

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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.