Yuki Gosei Kogyo's (TSE:4531) Strong Earnings Are Of Good Quality

Yuki Gosei Kogyo Co., Ltd.'s (TSE:4531) strong earnings report was rewarded with a positive stock price move. We did some digging and found some further encouraging factors that investors will like.

See our latest analysis for Yuki Gosei Kogyo

How Do Unusual Items Influence Profit?

For anyone who wants to understand Yuki Gosei Kogyo's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by JP¥157m 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. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Yuki Gosei Kogyo to produce a higher profit next year, all else being equal.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Yuki Gosei Kogyo.

Our Take On Yuki Gosei Kogyo's Profit Performance

Unusual items (expenses) detracted from Yuki Gosei Kogyo's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Yuki Gosei Kogyo's statutory profit actually understates its earnings potential! 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 want to do dive deeper into Yuki Gosei Kogyo, you'd also look into what risks it is currently facing. To that end, you should learn about the 2 warning signs we've spotted with Yuki Gosei Kogyo (including 1 which is a bit unpleasant).

This note has only looked at a single factor that sheds light on the nature of Yuki Gosei Kogyo'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.