We Think Nissin ShojiLtd's (TSE:7490) Solid Earnings Are Understated

The market seemed underwhelmed by last week's earnings announcement from Nissin Shoji Co.,Ltd. (TSE:7490) despite the healthy numbers. We did some digging, and we think that investors are missing some encouraging factors in the underlying numbers.

Check out our latest analysis for Nissin ShojiLtd

The Impact Of Unusual Items On Profit

For anyone who wants to understand Nissin ShojiLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by JP¥161m due 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. Assuming those unusual expenses don't come up again, we'd therefore expect Nissin ShojiLtd 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 Nissin ShojiLtd.

Our Take On Nissin ShojiLtd's Profit Performance

Because unusual items detracted from Nissin ShojiLtd'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 Nissin ShojiLtd's earnings potential is at least as good as it seems, and maybe even better! 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. If you want to do dive deeper into Nissin ShojiLtd, you'd also look into what risks it is currently facing. For example, Nissin ShojiLtd has 4 warning signs (and 1 which is a bit unpleasant) we think you should know about.

Today we've zoomed in on a single data point to better understand the nature of Nissin ShojiLtd'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.