Sumitomo Metal Mining's (TSE:5713) Soft Earnings Are Actually Better Than They Appear

Sumitomo Metal Mining Co., Ltd.'s (TSE:5713) earnings announcement last week didn't impress shareholders. While the headline numbers were soft, we believe that investors might be missing some encouraging factors.

See our latest analysis for Sumitomo Metal Mining

The Impact Of Unusual Items On Profit

For anyone who wants to understand Sumitomo Metal Mining's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by JP¥8.0b due to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. 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 Sumitomo Metal Mining 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 Sumitomo Metal Mining's Profit Performance

Because unusual items detracted from Sumitomo Metal Mining's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Sumitomo Metal Mining's statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. 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 Sumitomo Metal Mining, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 2 warning signs for Sumitomo Metal Mining and you'll want to know about these.

Today we've zoomed in on a single data point to better understand the nature of Sumitomo Metal Mining's 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. 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.