Shareholders Can Be Confident That Toyobo's (TSE:3101) Earnings Are High Quality

Investors were underwhelmed by the solid earnings posted by Toyobo Co., Ltd. (TSE:3101) recently. We have done some analysis and have found some comforting factors beneath the profit numbers.

View our latest analysis for Toyobo

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Toyobo's profit was reduced by JP¥1.2b, 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. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Toyobo to produce a higher profit next year, all else being equal.

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 Toyobo's Profit Performance

Unusual items (expenses) detracted from Toyobo's earnings over the last year, but we might see an improvement next year. Because of this, we think Toyobo's earnings potential is at least as good as it seems, and maybe even better! And one can definitely find a positive in the fact that it made a profit this year, despite losing money 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. At Simply Wall St, we found 2 warning signs for Toyobo and we think they deserve your attention.

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