Weak Statutory Earnings May Not Tell The Whole Story For ASKA Pharmaceutical HoldingsLtd (TSE:4886)

ASKA Pharmaceutical Holdings Co.,Ltd.'s (TSE:4886) recent weak earnings report didn't cause a big stock movement. We think that investors are worried about some weaknesses underlying the earnings.

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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¥978m worth of unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. If ASKA Pharmaceutical HoldingsLtd doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current 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 ASKA Pharmaceutical HoldingsLtd's Profit Performance

Arguably, ASKA Pharmaceutical HoldingsLtd's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that ASKA Pharmaceutical HoldingsLtd's true underlying earnings power is actually less than its statutory profit. Nonetheless, it's still worth noting that its earnings per share have grown at 19% 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 while earnings quality is important, it's equally important to consider the risks facing ASKA Pharmaceutical HoldingsLtd at this point in time. Every company has risks, and we've spotted 2 warning signs for ASKA Pharmaceutical HoldingsLtd you should know about.

This note has only looked at a single factor that sheds light on the nature of ASKA Pharmaceutical HoldingsLtd'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. 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.