Weak Statutory Earnings May Not Tell The Whole Story For JFE Holdings (TSE:5411)

A lackluster earnings announcement from JFE Holdings, Inc. (TSE:5411) last week didn't sink the stock price. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

We've discovered 4 warning signs about JFE Holdings. View them for free.

The Impact Of Unusual Items On Profit

Importantly, our data indicates that JFE Holdings' profit received a boost of JP¥48b 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 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. And that's as you'd expect, given these boosts are described as 'unusual'. JFE Holdings had a rather significant contribution from unusual items relative to its profit to March 2025. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

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 JFE Holdings' Profit Performance

As we discussed above, we think the significant positive unusual item makes JFE Holdings' earnings a poor guide to its underlying profitability. For this reason, we think that JFE Holdings' statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. In further bad news, its earnings per share decreased in the last year. 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. So while earnings quality is important, it's equally important to consider the risks facing JFE Holdings at this point in time. Every company has risks, and we've spotted 4 warning signs for JFE Holdings you should know about.

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