Does NANSO TransportLtd's (TYO:9034) Statutory Profit Adequately Reflect Its Underlying Profit?

It might be old fashioned, but we really like to invest in companies that make a profit, each and every year. Having said that, sometimes statutory profit levels are not a good guide to ongoing profitability, because some short term one-off factor has impacted profit levels. This article will consider whether NANSO TransportLtd's (TYO:9034) statutory profits are a good guide to its underlying earnings.

We like the fact that NANSO TransportLtd made a profit of JP¥681.0m on its revenue of JP¥13.9b, in the last year. As you can see in the chart below, its profit has declined over the last three years, even though its revenue has increased.

View our latest analysis for NANSO TransportLtd

Of course, it is only sensible to look beyond the statutory profits and question how well those numbers represent the sustainable earnings power of the business. This article will discuss how unusual items have impacted NANSO TransportLtd's most recent profit results. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of NANSO TransportLtd.

The Impact Of Unusual Items On Profit

Importantly, our data indicates that NANSO TransportLtd's profit was reduced by JP¥148m, 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 NANSO TransportLtd to produce a higher profit next year, all else being equal.

Our Take On NANSO TransportLtd's Profit Performance

Because unusual items detracted from NANSO TransportLtd'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 NANSO TransportLtd's earnings potential is at least as good as it seems, and maybe even better! On the other hand, its EPS actually shrunk in the last twelve months. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. If you want to do dive deeper into NANSO TransportLtd, you'd also look into what risks it is currently facing. For instance, we've identified 3 warning signs for NANSO TransportLtd (1 is a bit unpleasant) you should be familiar with.

This note has only looked at a single factor that sheds light on the nature of NANSO TransportLtd's profit. But there are plenty of other ways to inform your opinion of a company. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. 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 that insiders are buying to be useful.

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This article by Simply Wall St is general in nature. 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.
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