We Think That There Are Issues Underlying Koryojyuhan's (TSE:3495) Earnings

Koryojyuhan Co., Ltd.'s (TSE:3495) robust earnings report didn't manage to move the market for its stock. We did some digging, and we found some concerning factors in the details.

Check out our latest analysis for Koryojyuhan

The Impact Of Unusual Items On Profit

For anyone who wants to understand Koryojyuhan's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from JP¥76m 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. 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 Koryojyuhan 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 Koryojyuhan.

Our Take On Koryojyuhan's Profit Performance

Arguably, Koryojyuhan's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Koryojyuhan's 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. If you'd like to know more about Koryojyuhan as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 3 warning signs for Koryojyuhan you should be mindful of and 1 of them is a bit concerning.

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