Yokohama Maruuo (TSE:8045) Is Posting Promising Earnings But The Good News Doesn’t Stop There

Yokohama Maruuo Co., Ltd.'s (TSE:8045) solid earnings announcement recently didn't do much to the stock price. Our analysis suggests that shareholders might be missing some positive underlying factors in the earnings report.

See our latest analysis for Yokohama Maruuo

How Do Unusual Items Influence Profit?

To properly understand Yokohama Maruuo's profit results, we need to consider the JP¥55m expense attributed 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 Yokohama Maruuo 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 Yokohama Maruuo.

Our Take On Yokohama Maruuo's Profit Performance

Because unusual items detracted from Yokohama Maruuo'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 Yokohama Maruuo's earnings potential is at least as good as it seems, and maybe even better! And the EPS is up 54% annually, over the last three years. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. At Simply Wall St, we found 2 warning signs for Yokohama Maruuo and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of Yokohama Maruuo'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. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful.

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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.