Japan Oil Transportation's (TSE:9074) Earnings Are Weaker Than They Seem

Japan Oil Transportation Co., Ltd. (TSE:9074) announced strong profits, but the stock was stagnant. We did some digging, and we found some concerning factors in the details.

Check out our latest analysis for Japan Oil Transportation

How Do Unusual Items Influence Profit?

For anyone who wants to understand Japan Oil Transportation's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from JP¥144m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And that's as you'd expect, given these boosts are described as 'unusual'. If Japan Oil Transportation doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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

Our Take On Japan Oil Transportation's Profit Performance

Arguably, Japan Oil Transportation's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Japan Oil Transportation's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 24% per annum growth in EPS for the last three. 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. 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. In terms of investment risks, we've identified 1 warning sign with Japan Oil Transportation, and understanding this should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of Japan Oil Transportation'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. 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.