Yakult HonshaLtd's (TSE:2267) Weak Earnings May Only Reveal A Part Of The Whole Picture

The market wasn't impressed with the soft earnings from Yakult Honsha Co.,Ltd. (TSE:2267) recently. We did some analysis, and found that there are some reasons to be cautious about the headline numbers.

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The Impact Of Unusual Items On Profit

For anyone who wants to understand Yakult HonshaLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from JP¥3.9b worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And that's as you'd expect, given these boosts are described as 'unusual'. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

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 Yakult HonshaLtd's Profit Performance

Arguably, Yakult HonshaLtd's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Yakult HonshaLtd's true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over the last twelve months. 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 Yakult HonshaLtd, you'd also look into what risks it is currently facing. While conducting our analysis, we found that Yakult HonshaLtd has 1 warning sign and it would be unwise to ignore this.

Today we've zoomed in on a single data point to better understand the nature of Yakult HonshaLtd'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.