There May Be Underlying Issues With The Quality Of Coca-Cola Bottlers Japan Holdings' (TSE:2579) Earnings

Coca-Cola Bottlers Japan Holdings Inc.'s (TSE:2579) stock was strong after they recently reported robust earnings. However, our analysis suggests that shareholders may be missing some factors that indicate the earnings result was not as good as it looked.

View our latest analysis for Coca-Cola Bottlers Japan Holdings

The Impact Of Unusual Items On Profit

For anyone who wants to understand Coca-Cola Bottlers Japan Holdings' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from JP¥2.4b worth of unusual items. 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. Which is hardly surprising, given the name. If Coca-Cola Bottlers Japan Holdings doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current 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 Coca-Cola Bottlers Japan Holdings' Profit Performance

Arguably, Coca-Cola Bottlers Japan Holdings' statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Coca-Cola Bottlers Japan Holdings' true underlying earnings power is actually less than its statutory profit. But the happy news is that, while acknowledging we have to look beyond the statutory numbers, those numbers are still improving, with EPS growing at a very high rate over the last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Every company has risks, and we've spotted 2 warning signs for Coca-Cola Bottlers Japan Holdings you should know about.

This note has only looked at a single factor that sheds light on the nature of Coca-Cola Bottlers Japan Holdings' 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. 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.