Are IBOKINLtd's (TYO:5699) Statutory Earnings A Good Reflection Of Its Earnings Potential?

As a general rule, we think profitable companies are less risky than companies that lose money. Having said that, sometimes statutory profit levels are not a good guide to ongoing profitability, because some short term one-off factor has impacted profit levels. Today we'll focus on whether this year's statutory profits are a good guide to understanding IBOKINLtd (TYO:5699).

It's good to see that over the last twelve months IBOKINLtd made a profit of JP¥286.0m on revenue of JP¥5.45b. Even though its revenue is down over the last three years, its profit has actually increased, as you can see, below.

Check out our latest analysis for IBOKINLtd

Of course, it is only sensible to look beyond the statutory profits and question how well those numbers represent the sustainable earnings power of the business. This article will focus on the impact unusual items have had on IBOKINLtd's statutory earnings. 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.

The Impact Of Unusual Items On Profit

For anyone who wants to understand IBOKINLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from JP¥34m worth of unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And that's as you'd expect, given these boosts are described as 'unusual'. If IBOKINLtd doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Our Take On IBOKINLtd's Profit Performance

Arguably, IBOKINLtd's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that IBOKINLtd's statutory profits are better than its underlying earnings power. The good news is that its earnings per share increased slightly in the last year. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, we've discovered 2 warning signs that you should run your eye over to get a better picture of IBOKINLtd.

Today we've zoomed in on a single data point to better understand the nature of IBOKINLtd's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

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This article by Simply Wall St is general in nature. 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.
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