We Think That There Are Some Issues For Okayamaken Freight Transportation (TSE:9063) Beyond Its Promising Earnings

Okayamaken Freight Transportation Co., Ltd.'s (TSE:9063) robust recent earnings didn't do much to move the stock. We think this is due to investors looking beyond the statutory profits and being concerned with what they see.

Check out our latest analysis for Okayamaken Freight Transportation

How Do Unusual Items Influence Profit?

To properly understand Okayamaken Freight Transportation's profit results, we need to consider the JP¥2.8b gain attributed to unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. We can see that Okayamaken Freight Transportation's positive unusual items were quite significant relative to its profit in the year to March 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

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

As we discussed above, we think the significant positive unusual item makes Okayamaken Freight Transportation's earnings a poor guide to its underlying profitability. For this reason, we think that Okayamaken Freight Transportation's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. But the good news is that its EPS growth over the last three years has been very impressive. 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 Okayamaken Freight Transportation at this point in time. For example - Okayamaken Freight Transportation has 3 warning signs we think you should be aware of.

Today we've zoomed in on a single data point to better understand 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.