We Think Yukiguni Factory's (TSE:1375) Healthy Earnings Might Be Conservative

Yukiguni Factory Co., Ltd.'s (TSE:1375) solid earnings announcement recently didn't do much to the stock price. We did some analysis to find out why and believe that investors might be missing some encouraging factors contained in the earnings.

We've discovered 3 warning signs about Yukiguni Factory. View them for free.

The Impact Of Unusual Items On Profit

To properly understand Yukiguni Factory's profit results, we need to consider the JP¥1.6b expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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. Assuming those unusual expenses don't come up again, we'd therefore expect Yukiguni Factory 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 Yukiguni Factory.

Our Take On Yukiguni Factory's Profit Performance

Because unusual items detracted from Yukiguni Factory'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 Yukiguni Factory's statutory profit actually understates its earnings potential! And the EPS is up 11% over the last twelve months. 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 Yukiguni Factory, you'd also look into what risks it is currently facing. When we did our research, we found 3 warning signs for Yukiguni Factory (1 is a bit unpleasant!) that we believe deserve your full attention.

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