Shareholders Will Be Pleased With The Quality of Ishihara Sangyo KaishaLtd's (TSE:4028) Earnings

Ishihara Sangyo Kaisha,Ltd.'s (TSE:4028) earnings announcement last week was disappointing for investors, despite the decent profit numbers. We did some digging and actually think they are being unnecessarily pessimistic.

See our latest analysis for Ishihara Sangyo KaishaLtd

How Do Unusual Items Influence Profit?

For anyone who wants to understand Ishihara Sangyo KaishaLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by JP¥5.2b due to unusual items. 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. Ishihara Sangyo KaishaLtd took a rather significant hit from unusual items in the year to March 2024. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be.

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 Ishihara Sangyo KaishaLtd's Profit Performance

As we mentioned previously, the Ishihara Sangyo KaishaLtd's profit was hampered by unusual items in the last year. Because of this, we think Ishihara Sangyo KaishaLtd's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! And on top of that, its earnings per share have grown at an extremely impressive rate 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. So while earnings quality is important, it's equally important to consider the risks facing Ishihara Sangyo KaishaLtd at this point in time. Be aware that Ishihara Sangyo KaishaLtd is showing 3 warning signs in our investment analysis and 1 of those shouldn't be ignored...

Today we've zoomed in on a single data point to better understand the nature of Ishihara Sangyo KaishaLtd's 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.