Kyoei SangyoLtd's (TSE:6973) Profits May Not Reveal Underlying Issues

Kyoei Sangyo Co.,Ltd.'s (TSE:6973) healthy profit numbers didn't contain any surprises for investors. We think this is due to investors looking beyond the statutory profits and being concerned with what they see.

See our latest analysis for Kyoei SangyoLtd

The Impact Of Unusual Items On Profit

For anyone who wants to understand Kyoei SangyoLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from JP¥530m worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's as you'd expect, given these boosts are described as 'unusual'. We can see that Kyoei SangyoLtd's positive unusual items were quite significant relative to its profit in the year to September 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Kyoei SangyoLtd.

Our Take On Kyoei SangyoLtd's Profit Performance

As we discussed above, we think the significant positive unusual item makes Kyoei SangyoLtd's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Kyoei SangyoLtd's underlying earnings power is lower 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. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. If you'd like to know more about Kyoei SangyoLtd as a business, it's important to be aware of any risks it's facing. While conducting our analysis, we found that Kyoei SangyoLtd has 3 warning signs and it would be unwise to ignore them.

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