Human Metabolome Technologies' (TSE:6090) Weak Earnings May Only Reveal A Part Of The Whole Picture

The subdued market reaction suggests that Human Metabolome Technologies, Inc.'s (TSE:6090) 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.

Check out our latest analysis for Human Metabolome Technologies

The Impact Of Unusual Items On Profit

For anyone who wants to understand Human Metabolome Technologies' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from JP¥21m worth of unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. If Human Metabolome Technologies doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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

Our Take On Human Metabolome Technologies' Profit Performance

Arguably, Human Metabolome Technologies' statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Human Metabolome Technologies' true underlying earnings power is actually less 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. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. At Simply Wall St, we found 2 warning signs for Human Metabolome Technologies and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of Human Metabolome Technologies' 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. 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.