UCHIYAMA HOLDINGSLtd's (TSE:6059) Earnings Are Of Questionable Quality

UCHIYAMA HOLDINGS Co.,Ltd. (TSE:6059) announced strong profits, but the stock was stagnant. Our analysis suggests that shareholders have noticed something concerning in the numbers.

Check out our latest analysis for UCHIYAMA HOLDINGSLtd

The Impact Of Unusual Items On Profit

For anyone who wants to understand UCHIYAMA HOLDINGSLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from JP¥55m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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. 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).

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

Our Take On UCHIYAMA HOLDINGSLtd's Profit Performance

Arguably, UCHIYAMA HOLDINGSLtd's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that UCHIYAMA HOLDINGSLtd's true underlying earnings power is actually less than its statutory profit. On the bright side, the company showed enough improvement to book a profit this year, after losing money last year. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. If you'd like to know more about UCHIYAMA HOLDINGSLtd as a business, it's important to be aware of any risks it's facing. For example, we've discovered 2 warning signs that you should run your eye over to get a better picture of UCHIYAMA HOLDINGSLtd.

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