We Think That There Are Issues Underlying Tensho Electric Industries' (TSE:6776) Earnings

Tensho Electric Industries Co., Ltd.'s (TSE:6776) robust earnings report didn't manage to move the market for its stock. We did some digging, and we found some concerning factors in the details.

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The Impact Of Unusual Items On Profit

To properly understand Tensho Electric Industries' profit results, we need to consider the JP¥625m gain attributed to unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. 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'. Tensho Electric Industries had a rather significant contribution from unusual items relative to its profit to March 2025. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Tensho Electric Industries.

Our Take On Tensho Electric Industries' Profit Performance

As we discussed above, we think the significant positive unusual item makes Tensho Electric Industries' earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Tensho Electric Industries' 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. 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 if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, we've discovered 3 warning signs that you should run your eye over to get a better picture of Tensho Electric Industries.

This note has only looked at a single factor that sheds light on the nature of Tensho Electric Industries' profit. But there are plenty of other ways to inform your opinion of a company. 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. 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.