The Strong Earnings Posted By Kanagawa Chuo Kotsu (TSE:9081) Are A Good Indication Of The Strength Of The Business

Even though Kanagawa Chuo Kotsu Co., Ltd.'s (TSE:9081) recent earnings release was robust, the market didn't seem to notice. We think that investors have missed some encouraging factors underlying the profit figures.

See our latest analysis for Kanagawa Chuo Kotsu

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Kanagawa Chuo Kotsu's profit was reduced by JP¥2.7b, due to unusual items, over the last year. 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 Kanagawa Chuo Kotsu 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 Kanagawa Chuo Kotsu.

Our Take On Kanagawa Chuo Kotsu's Profit Performance

Because unusual items detracted from Kanagawa Chuo Kotsu's 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 Kanagawa Chuo Kotsu's statutory profit actually understates its earnings potential! Furthermore, it has done a great job growing EPS over 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. If you'd like to know more about Kanagawa Chuo Kotsu as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 3 warning signs for Kanagawa Chuo Kotsu (of which 1 makes us a bit uncomfortable!) you should know about.

Today we've zoomed in on a single data point to better understand the nature of Kanagawa Chuo Kotsu'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. 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.