NittoBest's (TSE:2877) Solid Profits Have Weak Fundamentals

NittoBest Corporation (TSE:2877) announced strong profits, but the stock was stagnant. We did some digging, and we found some concerning factors in the details.

Check out our latest analysis for NittoBest

How Do Unusual Items Influence Profit?

For anyone who wants to understand NittoBest's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from JP¥83m worth of unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. 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'. If NittoBest doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of NittoBest.

Our Take On NittoBest's Profit Performance

Arguably, NittoBest's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that NittoBest's statutory profits are better than its underlying earnings power. The good news is that, its earnings per share increased by 69% in 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. If you'd like to know more about NittoBest as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 2 warning signs for NittoBest (of which 1 shouldn't be ignored!) you should know about.

This note has only looked at a single factor that sheds light on the nature of NittoBest's profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. 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.