We Like Taiyo Holdings' (TSE:4626) Earnings For More Than Just Statutory Profit

Shareholders appeared to be happy with Taiyo Holdings Co., Ltd.'s (TSE:4626) solid earnings report last week. According to our analysis of the report, the strong headline profit numbers are supported by strong earnings fundamentals.

Check out our latest analysis for Taiyo Holdings

How Do Unusual Items Influence Profit?

To properly understand Taiyo Holdings' profit results, we need to consider the JP¥5.2b expense attributed 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 that's hardly a surprise given these line items are considered unusual. If Taiyo Holdings 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 Taiyo Holdings' Profit Performance

Unusual items (expenses) detracted from Taiyo Holdings' earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Taiyo Holdings' statutory profit actually understates its earnings potential! And the EPS is up 14% over the last twelve months. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. You'd be interested to know, that we found 1 warning sign for Taiyo Holdings and you'll want to know about it.

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