Yuken Kogyo's (TSE:6393) Earnings Offer More Than Meets The Eye

Investors signalled that they were pleased with Yuken Kogyo Co., Ltd.'s (TSE:6393) most recent earnings report. According to our analysis of the report, the strong headline profit numbers are supported by strong earnings fundamentals.

See our latest analysis for Yuken Kogyo

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Yuken Kogyo's profit was reduced by JP¥250m, 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. 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 Yuken Kogyo to produce a higher profit next year, all else being equal.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Yuken Kogyo.

Our Take On Yuken Kogyo's Profit Performance

Unusual items (expenses) detracted from Yuken Kogyo's earnings over the last year, but we might see an improvement next year. Because of this, we think Yuken Kogyo's earnings potential is at least as good as it seems, and maybe even better! Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Case in point: We've spotted 1 warning sign for Yuken Kogyo you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Yuken Kogyo's profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. 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.