Okayamaken Freight Transportation's (TSE:9063) Shareholders Have More To Worry About Than Only Soft Earnings

A lackluster earnings announcement from Okayamaken Freight Transportation Co., Ltd. (TSE:9063) last week didn't sink the stock price. However, we believe that investors should be aware of some underlying factors which may be of concern.

Check out our latest analysis for Okayamaken Freight Transportation

The Impact Of Unusual Items On Profit

For anyone who wants to understand Okayamaken Freight Transportation's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from JP¥193m worth of unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Okayamaken Freight Transportation.

Our Take On Okayamaken Freight Transportation's Profit Performance

Arguably, Okayamaken Freight Transportation's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Okayamaken Freight Transportation's statutory profits are better than its underlying earnings power. In further bad news, its earnings per share decreased 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 if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. In terms of investment risks, we've identified 3 warning signs with Okayamaken Freight Transportation, and understanding these should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of Okayamaken Freight Transportation's 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. 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.