Kawanishi WarehouseLtd's (TSE:9322) Soft Earnings Are Actually Better Than They Appear

Shareholders appeared unconcerned with Kawanishi Warehouse Co.,Ltd.'s (TSE:9322) lackluster earnings report last week. Our analysis suggests that while the profits are soft, the foundations of the business are strong.

View our latest analysis for Kawanishi WarehouseLtd

How Do Unusual Items Influence Profit?

For anyone who wants to understand Kawanishi WarehouseLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by JP¥131m due 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. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Kawanishi WarehouseLtd to produce a higher profit next year, all else being equal.

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

Our Take On Kawanishi WarehouseLtd's Profit Performance

Because unusual items detracted from Kawanishi WarehouseLtd's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Kawanishi WarehouseLtd's earnings potential is at least as good as it seems, and maybe even better! And the EPS is up 47% annually, over the last three years. 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'd like to know more about Kawanishi WarehouseLtd as a business, it's important to be aware of any risks it's facing. For example, we've discovered 3 warning signs that you should run your eye over to get a better picture of Kawanishi WarehouseLtd.

Today we've zoomed in on a single data point to better understand the nature of Kawanishi WarehouseLtd'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.