Nishimoto's (TSE:9260) Soft Earnings Don't Show The Whole Picture

Nishimoto Co., Ltd.'s (TSE:9260) stock was strong despite it releasing a soft earnings report last week. However, we think the company is showing some signs that things are more promising than they seem.

View our latest analysis for Nishimoto

How Do Unusual Items Influence Profit?

To properly understand Nishimoto's profit results, we need to consider the JP¥2.6b 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. If Nishimoto doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

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

Our Take On Nishimoto's Profit Performance

Because unusual items detracted from Nishimoto'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 Nishimoto's earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share have grown at 42% per year 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. If you'd like to know more about Nishimoto as a business, it's important to be aware of any risks it's facing. For example - Nishimoto has 3 warning signs we think you should be aware of.

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