We Think That There Are Issues Underlying Takasago International's (TSE:4914) Earnings

Takasago International Corporation (TSE:4914) announced strong profits, but the stock was stagnant. We did some digging, and we found some concerning factors in the details.

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How Do Unusual Items Influence Profit?

Importantly, our data indicates that Takasago International's profit received a boost of JP¥3.0b in unusual items, over the last year. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. Which is hardly surprising, given the name. If Takasago International 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 Takasago International.

Our Take On Takasago International's Profit Performance

Arguably, Takasago International's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Takasago International's statutory profits are better than its underlying earnings power. But the good news is that its EPS growth over the last three years has been very impressive. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For example - Takasago International has 1 warning sign we think you should be aware of.

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