We Think That There Are Issues Underlying Okayamaken Freight Transportation's (TSE:9063) Earnings

Okayamaken Freight Transportation Co., Ltd. (TSE:9063) just reported some strong earnings, and the market reacted accordingly with a healthy uplift in the share price. However, we think that shareholders may be missing some concerning details in the numbers.

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The Impact Of Unusual Items On Profit

Importantly, our data indicates that Okayamaken Freight Transportation's profit received a boost of JP¥147m in unusual items, over the last year. 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. Which is hardly surprising, given the name. If Okayamaken Freight Transportation doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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. Therefore, it seems possible to us that Okayamaken Freight Transportation's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 49% EPS growth in 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. In terms of investment risks, we've identified 1 warning sign with Okayamaken Freight Transportation, and understanding it should be part of your investment process.

This note has only looked at a single factor that sheds light on the nature of Okayamaken Freight Transportation's 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.