Casio ComputerLtd's (TSE:6952) Conservative Accounting Might Explain Soft Earnings

Casio Computer Co.,Ltd.'s (TSE:6952) recent soft profit numbers didn't appear to worry shareholders, as the stock price showed strength. Our analysis suggests that investors may have noticed some promising signs beyond the statutory profit figures.

Check out our latest analysis for Casio ComputerLtd

How Do Unusual Items Influence Profit?

For anyone who wants to understand Casio ComputerLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by JP¥5.4b 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, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Casio ComputerLtd to produce a higher profit next year, all else being equal.

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 Casio ComputerLtd's Profit Performance

Because unusual items detracted from Casio ComputerLtd'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 Casio ComputerLtd's earnings potential is at least as good as it seems, and maybe even better! Unfortunately, though, its earnings per share actually fell back over the last year. 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'd like to know more about Casio ComputerLtd as a business, it's important to be aware of any risks it's facing. You'd be interested to know, that we found 3 warning signs for Casio ComputerLtd and you'll want to know about these.

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