Morinaga Milk Industry's (TSE:2264) Soft Earnings Don't Show The Whole Picture

The market for Morinaga Milk Industry Co., Ltd.'s (TSE:2264) shares didn't move much after it posted weak earnings recently. We did some digging, and we believe the earnings are stronger than they seem.

Our free stock report includes 3 warning signs investors should be aware of before investing in Morinaga Milk Industry. Read for free now.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Morinaga Milk Industry's profit was reduced by JP¥14b, due to unusual items, over the last year. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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. Morinaga Milk Industry took a rather significant hit from unusual items in the year to March 2025. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be.

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 Morinaga Milk Industry's Profit Performance

As we discussed above, we think the significant unusual expense will make Morinaga Milk Industry's statutory profit lower than it would otherwise have been. Based on this observation, we consider it possible that Morinaga Milk Industry's statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back over the last year. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For instance, we've identified 3 warning signs for Morinaga Milk Industry (1 is potentially serious) you should be familiar with.

Today we've zoomed in on a single data point to better understand the nature of Morinaga Milk Industry'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. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful.

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.