Some May Be Optimistic About Riso Kagaku's (TSE:6413) Earnings

Shareholders appeared unconcerned with Riso Kagaku Corporation's (TSE:6413) lackluster earnings report last week. Our analysis suggests that while the profits are soft, the foundations of the business are strong.

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How Do Unusual Items Influence Profit?

Importantly, our data indicates that Riso Kagaku's profit was reduced by JP¥757m, 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. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Riso Kagaku 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 Riso Kagaku's Profit Performance

Because unusual items detracted from Riso Kagaku's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Riso Kagaku's statutory profit actually understates its earnings potential! And it's also good to see that its earnings per share have improved a bit 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example - Riso Kagaku has 1 warning sign we think you should be aware of.

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