Earnings Troubles May Signal Larger Issues for Daiwa House Industry (TSE:1925) Shareholders

The subdued market reaction suggests that Daiwa House Industry Co., Ltd.'s (TSE:1925) recent earnings didn't contain any surprises. However, we believe that investors should be aware of some underlying factors which may be of concern.

Check out our latest analysis for Daiwa House Industry

How Do Unusual Items Influence Profit?

For anyone who wants to understand Daiwa House Industry's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from JP¥34b 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. Which is hardly surprising, given the name. If Daiwa House Industry 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 Daiwa House Industry's Profit Performance

Arguably, Daiwa House Industry's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Daiwa House Industry's statutory profits are better than its underlying earnings power. Nonetheless, it's still worth noting that its earnings per share have grown at 54% 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. When we did our research, we found 2 warning signs for Daiwa House Industry (1 is a bit concerning!) that we believe deserve your full attention.

Today we've zoomed in on a single data point to better understand the nature of Daiwa House Industry'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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com