Stock Analysis

Are Ohmura ShigyoLtd's (TYO:3953) Statutory Earnings A Good Reflection Of Its Earnings Potential?

TSE:3953
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It might be old fashioned, but we really like to invest in companies that make a profit, each and every year. However, sometimes companies receive a one-off boost (or reduction) to their profit, and it's not always clear whether statutory profits are a good guide, going forward. This article will consider whether Ohmura ShigyoLtd's (TYO:3953) statutory profits are a good guide to its underlying earnings.

While Ohmura ShigyoLtd was able to generate revenue of JP¥4.90b in the last twelve months, we think its profit result of JP¥121.0m was more important. In the last few years both its revenue and its profit have fallen, as you can see in the chart below.

View our latest analysis for Ohmura ShigyoLtd

earnings-and-revenue-history
JASDAQ:3953 Earnings and Revenue History November 23rd 2020

Not all profits are equal, and we can learn more about the nature of a company's past profitability by diving deeper into the financial statements. This article will discuss how unusual items have impacted Ohmura ShigyoLtd's most recent profit results. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Ohmura ShigyoLtd.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Ohmura ShigyoLtd's profit was reduced by JP¥45m, due to unusual items, over the last year. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. If Ohmura ShigyoLtd doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Our Take On Ohmura ShigyoLtd's Profit Performance

Unusual items (expenses) detracted from Ohmura ShigyoLtd's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Ohmura ShigyoLtd's statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back over the 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. So while earnings quality is important, it's equally important to consider the risks facing Ohmura ShigyoLtd at this point in time. To help with this, we've discovered 2 warning signs (1 shouldn't be ignored!) that you ought to be aware of before buying any shares in Ohmura ShigyoLtd.

This note has only looked at a single factor that sheds light on the nature of Ohmura ShigyoLtd'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. 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 that insiders are buying to be useful.

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This article by Simply Wall St is general in nature. 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.
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