Senkon Logistics' (TSE:9051) Conservative Accounting Might Explain Soft Earnings

The market for Senkon Logistics Co., Ltd.'s (TSE:9051) shares didn't move much after it posted weak earnings recently. We think that the softer headline numbers might be getting counterbalanced by some positive underlying factors.

See our latest analysis for Senkon Logistics

How Do Unusual Items Influence Profit?

For anyone who wants to understand Senkon Logistics' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by JP¥81m due to unusual items. 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 Senkon Logistics to produce a higher profit next year, all else being equal.

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

Our Take On Senkon Logistics' Profit Performance

Unusual items (expenses) detracted from Senkon Logistics' earnings over the last year, but we might see an improvement next year. Because of this, we think Senkon Logistics' earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share have grown at 12% per year over the last three years. 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 Senkon Logistics, you'd also look into what risks it is currently facing. Case in point: We've spotted 4 warning signs for Senkon Logistics you should be mindful of and 1 of them shouldn't be ignored.

This note has only looked at a single factor that sheds light on the nature of Senkon Logistics' profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.