There May Be Reason For Hope In Japan Logistic Systems' (TSE:9060) Disappointing Earnings

Soft earnings didn't appear to concern Japan Logistic Systems Corp.'s (TSE:9060) shareholders over the last week. We did some digging, and we believe the earnings are stronger than they seem.

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How Do Unusual Items Influence Profit?

For anyone who wants to understand Japan Logistic Systems' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by JP¥301m due to unusual items. 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 that's hardly a surprise given these line items are considered unusual. If Japan Logistic Systems doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Japan Logistic Systems.

Our Take On Japan Logistic Systems' Profit Performance

Because unusual items detracted from Japan Logistic Systems' earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Japan Logistic Systems' statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back over the last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. So while earnings quality is important, it's equally important to consider the risks facing Japan Logistic Systems at this point in time. Our analysis shows 4 warning signs for Japan Logistic Systems (2 can't be ignored!) and we strongly recommend you look at these before investing.

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