We Think Japan Logistic Systems' (TSE:9060) Robust Earnings Are Conservative

The subdued stock price reaction suggests that Japan Logistic Systems Corp.'s (TSE:9060) strong earnings didn't offer any surprises. We think that investors have missed some encouraging factors underlying the profit figures.

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The Impact Of Unusual Items On 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¥279m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Japan Logistic Systems 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 Japan Logistic Systems.

Our Take On Japan Logistic Systems' Profit Performance

Unusual items (expenses) detracted from Japan Logistic Systems' earnings over the last year, but we might see an improvement next year. Because of this, we think Japan Logistic Systems' earnings potential is at least as good as it seems, and maybe even better! And the EPS is up 34% annually, 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. To help with this, we've discovered 2 warning signs (1 is significant!) that you ought to be aware of before buying any shares in Japan Logistic Systems.

Today we've zoomed in on a single data point to better understand the nature of Japan Logistic Systems' 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.