Hosokawa Micron's (TSE:6277) Soft Earnings Don't Show The Whole Picture

Investors were disappointed with the weak earnings posted by Hosokawa Micron Corporation (TSE:6277 ). However, our analysis suggests that the soft headline numbers are getting counterbalanced by some positive underlying factors.

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How Do Unusual Items Influence Profit?

To properly understand Hosokawa Micron's profit results, we need to consider the JP¥928m expense attributed 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, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Hosokawa Micron 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 Hosokawa Micron's Profit Performance

Unusual items (expenses) detracted from Hosokawa Micron's earnings over the last year, but we might see an improvement next year. Because of this, we think Hosokawa Micron's earnings potential is at least as good as it seems, and maybe even better! And the EPS is up 24% annually, 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. If you want to do dive deeper into Hosokawa Micron, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 1 warning sign for Hosokawa Micron you should know about.

This note has only looked at a single factor that sheds light on the nature of Hosokawa Micron's profit. But there are plenty of other ways to inform your opinion of a company. 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.