There May Be Underlying Issues With The Quality Of Soda Nikka's (TSE:8158) Earnings

Despite posting some strong earnings, the market for Soda Nikka Co., Ltd.'s (TSE:8158) stock hasn't moved much. Our analysis suggests that shareholders have noticed something concerning in the numbers.

Our free stock report includes 2 warning signs investors should be aware of before investing in Soda Nikka. Read for free now.

The Impact Of Unusual Items On Profit

For anyone who wants to understand Soda Nikka's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from JP¥838m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. We can see that Soda Nikka's positive unusual items were quite significant relative to its profit in the year to March 2025. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

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

Our Take On Soda Nikka's Profit Performance

As previously mentioned, Soda Nikka's large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. As a result, we think it may well be the case that Soda Nikka's underlying earnings power is lower than its statutory profit. Nonetheless, it's still worth noting that its earnings per share have grown at 64% 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. If you want to do dive deeper into Soda Nikka, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 2 warning signs for Soda Nikka you should know about.

This note has only looked at a single factor that sheds light on the nature of Soda Nikka's 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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.