We Think That There Are Issues Underlying Yotai Refractories' (TSE:5357) Earnings

Despite announcing strong earnings, Yotai Refractories Co., Ltd.'s (TSE:5357) stock was sluggish. Our analysis uncovered some concerning factors that we believe the market might be paying attention to.

View our latest analysis for Yotai Refractories

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Yotai Refractories' profit received a boost of JP¥1.6b in unusual items, over the last year. 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. Which is hardly surprising, given the name. Yotai Refractories had a rather significant contribution from unusual items relative to its profit to September 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Yotai Refractories.

Our Take On Yotai Refractories' Profit Performance

As we discussed above, we think the significant positive unusual item makes Yotai Refractories' earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Yotai Refractories' underlying earnings power is lower than its statutory profit. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. If you'd like to know more about Yotai Refractories as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 2 warning signs for Yotai Refractories you should know about.

This note has only looked at a single factor that sheds light on the nature of Yotai Refractories' 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.