Solid Earnings May Not Tell The Whole Story For Ohishi Sangyo (TSE:3943)

Ohishi Sangyo Co., Ltd.'s (TSE:3943) healthy profit numbers didn't contain any surprises for investors. We think this is due to investors looking beyond the statutory profits and being concerned with what they see.

View our latest analysis for Ohishi Sangyo

How Do Unusual Items Influence Profit?

To properly understand Ohishi Sangyo's profit results, we need to consider the JP¥193m gain attributed to 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. If Ohishi Sangyo 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 Ohishi Sangyo.

Our Take On Ohishi Sangyo's Profit Performance

We'd posit that Ohishi Sangyo's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that Ohishi Sangyo's statutory profits are better than its underlying earnings power. Nonetheless, it's still worth noting that its earnings per share have grown at 14% over the last three years. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. While conducting our analysis, we found that Ohishi Sangyo has 1 warning sign and it would be unwise to ignore this.

This note has only looked at a single factor that sheds light on the nature of Ohishi Sangyo'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.