Osaka Organic Chemical Industry (TSE:4187) Posted Healthy Earnings But There Are Some Other Factors To Be Aware Of

Investors were disappointed with Osaka Organic Chemical Industry Ltd.'s (TSE:4187) earnings, despite the strong profit numbers. We did some digging and found some worrying underlying problems.

View our latest analysis for Osaka Organic Chemical Industry

How Do Unusual Items Influence Profit?

For anyone who wants to understand Osaka Organic Chemical Industry's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from JP¥814m worth of unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's as you'd expect, given these boosts are described as 'unusual'. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

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 Osaka Organic Chemical Industry's Profit Performance

Arguably, Osaka Organic Chemical Industry's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Osaka Organic Chemical Industry's statutory profits are better than its underlying earnings power. The good news is that, its earnings per share increased by 25% in the last year. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. So while earnings quality is important, it's equally important to consider the risks facing Osaka Organic Chemical Industry at this point in time. At Simply Wall St, we found 1 warning sign for Osaka Organic Chemical Industry and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of Osaka Organic Chemical Industry'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. 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.