RS Technologies' (TSE:3445) Earnings Are Weaker Than They Seem

RS Technologies Co., Ltd.'s (TSE:3445) stock was strong after they recently reported robust earnings. However, we think that shareholders may be missing some concerning details in the numbers.

See our latest analysis for RS Technologies

The Impact Of Unusual Items On Profit

For anyone who wants to understand RS Technologies' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from JP¥1.5b 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 crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And, after all, that's exactly what the accounting terminology implies. If RS Technologies 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 RS Technologies' Profit Performance

Arguably, RS Technologies' statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that RS Technologies' statutory profits are better than its underlying earnings power. But the good news is that its EPS growth over the last three years has been very impressive. 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. If you want to do dive deeper into RS Technologies, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 1 warning sign for RS Technologies and you'll want to know about it.

Today we've zoomed in on a single data point to better understand the nature of RS Technologies' profit. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. 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.