There May Be Some Bright Spots In Morinaga Milk Industry's (TSE:2264) Earnings

The most recent earnings report from Morinaga Milk Industry Co., Ltd. (TSE:2264) was disappointing for shareholders. However, our analysis suggests that the soft headline numbers are getting counterbalanced by some positive underlying factors.

See our latest analysis for Morinaga Milk Industry

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Morinaga Milk Industry's profit was reduced by JP¥6.9b, due to unusual items, over the last year. 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. If Morinaga Milk Industry doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

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

Because unusual items detracted from Morinaga Milk Industry'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 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 while earnings quality is important, it's equally important to consider the risks facing Morinaga Milk Industry at this point in time. Every company has risks, and we've spotted 3 warning signs for Morinaga Milk Industry you should know about.

This note has only looked at a single factor that sheds light on the nature of Morinaga Milk Industry's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.

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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.