Shareholders Can Be Confident That Toin's (TSE:7923) Earnings Are High Quality

Investors were underwhelmed by the solid earnings posted by Toin Corporation (TSE:7923) recently. We have done some analysis and have found some comforting factors beneath the profit numbers.

Our free stock report includes 2 warning signs investors should be aware of before investing in Toin. Read for free now.

How Do Unusual Items Influence Profit?

To properly understand Toin's profit results, we need to consider the JP¥121m expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. If Toin doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

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

Our Take On Toin's Profit Performance

Because unusual items detracted from Toin'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 Toin's statutory profit actually understates its earnings potential! And on top of that, its earnings per share increased by 23% in the last year. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example - Toin has 2 warning signs we think you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Toin's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.