NARUMIYA INTERNATIONAL (TSE:9275) Posted Healthy Earnings But There Are Some Other Factors To Be Aware Of

Last week's profit announcement from NARUMIYA INTERNATIONAL Co., Ltd. (TSE:9275) was underwhelming for investors, despite headline numbers being robust. We think that the market might be paying attention to some underlying factors that they find to be concerning.

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How Do Unusual Items Influence Profit?

Importantly, our data indicates that NARUMIYA INTERNATIONAL's profit received a boost of JP¥188m in unusual items, over the last year. 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. And, after all, that's exactly what the accounting terminology implies. If NARUMIYA INTERNATIONAL doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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

Our Take On NARUMIYA INTERNATIONAL's Profit Performance

Arguably, NARUMIYA INTERNATIONAL's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that NARUMIYA INTERNATIONAL's true underlying earnings power is actually less than its statutory profit. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. At Simply Wall St, we found 2 warning signs for NARUMIYA INTERNATIONAL and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of NARUMIYA INTERNATIONAL's 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.