Maruha Nichiro's (TSE:1333) Earnings Are Of Questionable Quality

Despite announcing strong earnings, Maruha Nichiro Corporation's (TSE:1333) stock was sluggish. Our analysis uncovered some concerning factors that we believe the market might be paying attention to.

Our free stock report includes 2 warning signs investors should be aware of before investing in Maruha Nichiro. Read for free now.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Maruha Nichiro's profit received a boost of JP¥9.7b in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. 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, after all, that's exactly what the accounting terminology implies. Maruha Nichiro had a rather significant contribution from unusual items relative to its profit to March 2025. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

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

Our Take On Maruha Nichiro's Profit Performance

As we discussed above, we think the significant positive unusual item makes Maruha Nichiro's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Maruha Nichiro's underlying earnings power is lower than its statutory profit. But at least holders can take some solace from the 44% 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. If you want to do dive deeper into Maruha Nichiro, you'd also look into what risks it is currently facing. To help with this, we've discovered 2 warning signs (1 is a bit concerning!) that you ought to be aware of before buying any shares in Maruha Nichiro.

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