Weak Statutory Earnings May Not Tell The Whole Story For Tokyo Printing Ink Mfg (TSE:4635)

The market wasn't impressed with the soft earnings from Tokyo Printing Ink Mfg. Co., Ltd. (TSE:4635) recently. We did some analysis, and found that there are some reasons to be cautious about the headline numbers.

See our latest analysis for Tokyo Printing Ink Mfg

The Impact Of Unusual Items On Profit

For anyone who wants to understand Tokyo Printing Ink Mfg's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from JP¥71m worth of unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. If Tokyo Printing Ink Mfg doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Tokyo Printing Ink Mfg.

Our Take On Tokyo Printing Ink Mfg's Profit Performance

We'd posit that Tokyo Printing Ink Mfg's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Tokyo Printing Ink Mfg's true underlying earnings power is actually less than its statutory profit. Nonetheless, it's still worth noting that its earnings per share have grown at 47% 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 Tokyo Printing Ink Mfg, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 3 warning signs with Tokyo Printing Ink Mfg, and understanding them should be part of your investment process.

This note has only looked at a single factor that sheds light on the nature of Tokyo Printing Ink Mfg's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.