Earnings Troubles May Signal Larger Issues for Hagihara Industries (TSE:7856) Shareholders

The subdued market reaction suggests that Hagihara Industries Inc.'s (TSE:7856) recent earnings didn't contain any surprises. However, we believe that investors should be aware of some underlying factors which may be of concern.

See our latest analysis for Hagihara Industries

The Impact Of Unusual Items On Profit

For anyone who wants to understand Hagihara Industries' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from JP¥262m worth of unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. 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 Hagihara Industries' Profit Performance

Arguably, Hagihara Industries' statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Hagihara Industries' true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 15% 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'd like to know more about Hagihara Industries as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 1 warning sign for Hagihara Industries you should know about.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com