Why Dai Nippon Printing's (TSE:7912) Shaky Earnings Are Just The Beginning Of Its Problems

Investors were disappointed by Dai Nippon Printing Co., Ltd.'s (TSE:7912 ) latest earnings release. We did some analysis, and found that there are some reasons to be cautious about the headline numbers.

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The Impact Of Unusual Items On Profit

To properly understand Dai Nippon Printing's profit results, we need to consider the JP¥15b gain attributed to 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. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. 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 Dai Nippon Printing's Profit Performance

Arguably, Dai Nippon Printing's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Dai Nippon Printing's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 6.0% per annum growth in EPS for the last three. 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. If you want to do dive deeper into Dai Nippon Printing, you'd also look into what risks it is currently facing. At Simply Wall St, we found 1 warning sign for Dai Nippon Printing and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of Dai Nippon Printing's profit. But there are plenty of other ways to inform your opinion of a company. 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 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.