We Think You Can Look Beyond Idemitsu KosanLtd's (TSE:5019) Lackluster Earnings

Investors were disappointed with the weak earnings posted by Idemitsu Kosan Co.,Ltd. (TSE:5019 ). While the headline numbers were soft, we believe that investors might be missing some encouraging factors.

See our latest analysis for Idemitsu KosanLtd

The Impact Of Unusual Items On Profit

To properly understand Idemitsu KosanLtd's profit results, we need to consider the JP¥58b 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. 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. If Idemitsu KosanLtd doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

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 Idemitsu KosanLtd's Profit Performance

Because unusual items detracted from Idemitsu KosanLtd's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Idemitsu KosanLtd's statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at an extremely impressive rate over the last three years. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Every company has risks, and we've spotted 2 warning signs for Idemitsu KosanLtd (of which 1 is potentially serious!) you should know about.

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

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

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.