Sigmakoki (TSE:7713) Posted Healthy Earnings But There Are Some Other Factors To Be Aware Of

Despite posting some strong earnings, the market for Sigmakoki Co., Ltd.'s (TSE:7713) stock hasn't moved much. Our analysis suggests that this might be because shareholders have noticed some concerning underlying factors.

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The Impact Of Unusual Items On Profit

For anyone who wants to understand Sigmakoki's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from JP¥116m worth of unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. 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 that's as you'd expect, given these boosts are described as 'unusual'. If Sigmakoki 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 Sigmakoki.

Our Take On Sigmakoki's Profit Performance

Arguably, Sigmakoki's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Sigmakoki's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 44% EPS growth in the last year. 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 Sigmakoki as a business, it's important to be aware of any risks it's facing. You'd be interested to know, that we found 2 warning signs for Sigmakoki and you'll want to know about these bad boys.

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