We Think That There Are More Issues For Dkk-Toa (TSE:6848) Than Just Sluggish Earnings

The subdued market reaction suggests that Dkk-Toa Corporation's (TSE:6848) recent earnings didn't contain any surprises. We think that investors are worried about some weaknesses underlying the earnings.

We've discovered 2 warning signs about Dkk-Toa. View them for free.

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Dkk-Toa's profit received a boost of JP¥156m in unusual items, over the last year. 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 Dkk-Toa 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 Dkk-Toa.

Our Take On Dkk-Toa's Profit Performance

Arguably, Dkk-Toa's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Dkk-Toa's true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased in the last year. 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'd like to know more about Dkk-Toa as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 2 warning signs for Dkk-Toa (of which 1 makes us a bit uncomfortable!) you should know about.

Today we've zoomed in on a single data point to better understand the nature of Dkk-Toa'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.