There May Be Reason For Hope In Shinobu Foods Products' (TSE:2903) Disappointing Earnings

Shinobu Foods Products Co., Ltd.'s (TSE:2903) stock was strong despite it releasing a soft earnings report last week. We think that investors might be looking at some positive factors beyond the earnings numbers.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Shinobu Foods Products' profit was reduced by JP¥986m, 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, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Shinobu Foods Products to produce a higher profit next year, all else being equal.

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

Our Take On Shinobu Foods Products' Profit Performance

Because unusual items detracted from Shinobu Foods Products' 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 Shinobu Foods Products' statutory profit actually understates its earnings potential! 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. You'd be interested to know, that we found 2 warning signs for Shinobu Foods Products and you'll want to know about these bad boys.

Today we've zoomed in on a single data point to better understand the nature of Shinobu Foods Products' 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.