Trusco Nakayama's (TSE:9830) Earnings Are Weaker Than They Seem

Trusco Nakayama Corporation (TSE:9830) announced strong profits, but the stock was stagnant. Our analysis suggests that shareholders have noticed something concerning in the numbers.

View our latest analysis for Trusco Nakayama

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Trusco Nakayama's profit received a boost of JP¥2.6b in unusual items, over the last year. 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. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

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 Trusco Nakayama's Profit Performance

Arguably, Trusco Nakayama's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Trusco Nakayama's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 39% per annum growth in EPS for the last three. 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 Trusco Nakayama, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 1 warning sign with Trusco Nakayama, and understanding this should be part of your investment process.

This note has only looked at a single factor that sheds light on the nature of Trusco Nakayama'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.