We Like Nankai Chemical CompanyLimited's (TSE:4040) Earnings For More Than Just Statutory Profit

Despite posting healthy earnings, Nankai Chemical Company,Limited's (TSE:4040 ) stock has been quite weak. Along with the solid headline numbers, we think that investors have some reasons for optimism.

See our latest analysis for Nankai Chemical CompanyLimited

The Impact Of Unusual Items On Profit

For anyone who wants to understand Nankai Chemical CompanyLimited's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by JP¥168m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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. If Nankai Chemical CompanyLimited doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Nankai Chemical CompanyLimited.

Our Take On Nankai Chemical CompanyLimited's Profit Performance

Because unusual items detracted from Nankai Chemical CompanyLimited's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Nankai Chemical CompanyLimited's earnings potential is at least as good as it seems, and maybe even better! 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. If you'd like to know more about Nankai Chemical CompanyLimited as a business, it's important to be aware of any risks it's facing. At Simply Wall St, we found 3 warning signs for Nankai Chemical CompanyLimited and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of Nankai Chemical CompanyLimited'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. 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.