ASKA Pharmaceutical HoldingsLtd's (TSE:4886) Shareholders Have More To Worry About Than Only Soft Earnings

The subdued market reaction suggests that ASKA Pharmaceutical Holdings Co.,Ltd.'s (TSE:4886) recent earnings didn't contain any surprises. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

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How Do Unusual Items Influence Profit?

For anyone who wants to understand ASKA Pharmaceutical HoldingsLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from JP¥1.1b worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

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 ASKA Pharmaceutical HoldingsLtd's Profit Performance

Arguably, ASKA Pharmaceutical HoldingsLtd's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that ASKA Pharmaceutical HoldingsLtd's statutory profits are better than its underlying earnings power. Sadly, its EPS was down over the last twelve months. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example - ASKA Pharmaceutical HoldingsLtd has 2 warning signs we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of ASKA Pharmaceutical HoldingsLtd's 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.