Tokyo Rope Mfg's (TSE:5981) Conservative Accounting Might Explain Soft Earnings

The market was pleased with the recent earnings report from Tokyo Rope Mfg. Co., Ltd. (TSE:5981), despite the profit numbers being soft. Our analysis suggests that investors may have noticed some promising signs beyond the statutory profit figures.

Check out our latest analysis for Tokyo Rope Mfg

How Do Unusual Items Influence Profit?

For anyone who wants to understand Tokyo Rope Mfg's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by JP¥1.8b 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. Tokyo Rope Mfg took a rather significant hit from unusual items in the year to September 2024. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be.

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 Tokyo Rope Mfg's Profit Performance

As we mentioned previously, the Tokyo Rope Mfg's profit was hampered by unusual items in the last year. Because of this, we think Tokyo Rope Mfg's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! And the EPS is up 36% annually, over the last three years. 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. If you'd like to know more about Tokyo Rope Mfg as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 4 warning signs for Tokyo Rope Mfg you should be mindful of and 1 of them is potentially serious.

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