Mitsui Chemicals' (TSE:4183) Soft Earnings Don't Show The Whole Picture

The market was pleased with the recent earnings report from Mitsui Chemicals, Inc. (TSE:4183), despite the profit numbers being soft. We think that investors might be looking at some positive factors beyond the earnings numbers.

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How Do Unusual Items Influence Profit?

To properly understand Mitsui Chemicals' profit results, we need to consider the JP¥28b expense attributed 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 that's hardly a surprise given these line items are considered unusual. If Mitsui Chemicals doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

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 Mitsui Chemicals' Profit Performance

Unusual items (expenses) detracted from Mitsui Chemicals' earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Mitsui Chemicals' statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. 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. Case in point: We've spotted 4 warning signs for Mitsui Chemicals you should be aware of.

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