Hamai Industries' (TSE:6497) Conservative Accounting Might Explain Soft Earnings

Soft earnings didn't appear to concern Hamai Industries Ltd.'s (TSE:6497) shareholders over the last week. We think that the softer headline numbers might be getting counterbalanced by some positive underlying factors.

View our latest analysis for Hamai Industries

The Impact Of Unusual Items On Profit

For anyone who wants to understand Hamai Industries' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by JP¥455m due to unusual items. 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, after all, that's exactly what the accounting terminology implies. Hamai Industries took a rather significant hit from unusual items in the year to December 2024. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be.

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

Our Take On Hamai Industries' Profit Performance

As we discussed above, we think the significant unusual expense will make Hamai Industries' statutory profit lower than it would otherwise have been. Because of this, we think Hamai Industries' underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! On the other hand, its EPS actually shrunk in the last twelve months. 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 want to do dive deeper into Hamai Industries, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 4 warning signs for Hamai Industries and you'll want to know about these.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.