Statutory Profit Doesn't Reflect How Good Hankyu Hanshin Holdings' (TSE:9042) Earnings Are

Even though Hankyu Hanshin Holdings, Inc.'s (TSE:9042) recent earnings release was robust, the market didn't seem to notice. We think that investors have missed some encouraging factors underlying the profit figures.

Check out our latest analysis for Hankyu Hanshin Holdings

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Hankyu Hanshin Holdings' profit was reduced by JP¥27b, due to unusual items, over the last year. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Hankyu Hanshin Holdings 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 Hankyu Hanshin Holdings' Profit Performance

Because unusual items detracted from Hankyu Hanshin Holdings' earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Hankyu Hanshin Holdings' earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share increased by 22% in the last year. 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. So while earnings quality is important, it's equally important to consider the risks facing Hankyu Hanshin Holdings at this point in time. Every company has risks, and we've spotted 2 warning signs for Hankyu Hanshin Holdings (of which 1 can't be ignored!) you should know about.

This note has only looked at a single factor that sheds light on the nature of Hankyu Hanshin Holdings' 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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.