NIHON CHOUZAILtd's (TSE:3341) Soft Earnings Don't Show The Whole Picture

The most recent earnings report from NIHON CHOUZAI Co.,Ltd. (TSE:3341) was disappointing for shareholders. However, our analysis suggests that the soft headline numbers are getting counterbalanced by some positive underlying factors.

See our latest analysis for NIHON CHOUZAILtd

How Do Unusual Items Influence Profit?

Importantly, our data indicates that NIHON CHOUZAILtd's profit was reduced by JP¥4.4b, due to unusual items, over the last year. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. In the twelve months to September 2024, NIHON CHOUZAILtd had a big unusual items expense. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

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 NIHON CHOUZAILtd's Profit Performance

As we mentioned previously, the NIHON CHOUZAILtd's profit was hampered by unusual items in the last year. Because of this, we think NIHON CHOUZAILtd's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! 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. So while earnings quality is important, it's equally important to consider the risks facing NIHON CHOUZAILtd at this point in time. To that end, you should learn about the 4 warning signs we've spotted with NIHON CHOUZAILtd (including 2 which shouldn't be ignored).

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