Shareholders appeared unconcerned with IDEC Corporation's (TSE:6652) lackluster earnings report last week. Our analysis suggests that while the profits are soft, the foundations of the business are strong.
Check out our latest analysis for IDEC
The Impact Of Unusual Items On Profit
To properly understand IDEC's profit results, we need to consider the JP¥730m expense attributed 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. If IDEC doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.
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 IDEC's Profit Performance
Because unusual items detracted from IDEC's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that IDEC's statutory profit actually understates its earnings potential! And the EPS is up 62% annually, over the last three years. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. In terms of investment risks, we've identified 2 warning signs with IDEC, and understanding them should be part of your investment process.
This note has only looked at a single factor that sheds light on the nature of IDEC'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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
About TSE:6652
IDEC
Engages in the development of human machine interfaces, industrial switches, control devices, and daily life scenes in Japan and internationally.
Flawless balance sheet with reasonable growth potential.
