IbidenLtd's (TSE:4062) Soft Earnings Don't Show The Whole Picture

Ibiden Co.,Ltd.'s (TSE:4062) earnings announcement last week didn't impress shareholders. However, our analysis suggests that the soft headline numbers are getting counterbalanced by some positive underlying factors.

View our latest analysis for IbidenLtd

How Do Unusual Items Influence Profit?

Importantly, our data indicates that IbidenLtd's profit was reduced by JP¥6.8b, due to unusual items, over the last year. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. 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. Assuming those unusual expenses don't come up again, we'd therefore expect IbidenLtd to produce a higher profit next year, all else being equal.

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 IbidenLtd's Profit Performance

Because unusual items detracted from IbidenLtd's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think IbidenLtd's earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share have grown at 7.6% per year over the last three years. 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. So while earnings quality is important, it's equally important to consider the risks facing IbidenLtd at this point in time. While conducting our analysis, we found that IbidenLtd has 1 warning sign and it would be unwise to ignore it.

Today we've zoomed in on a single data point to better understand the nature of IbidenLtd's 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. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful.

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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.