A lackluster earnings announcement from Meiji Shipping Group Co., Ltd. (TSE:9115) 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 Meiji Shipping Group
How Do Unusual Items Influence Profit?
Importantly, our data indicates that Meiji Shipping Group's profit received a boost of JP¥6.0b in unusual items, over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And, after all, that's exactly what the accounting terminology implies. We can see that Meiji Shipping Group's positive unusual items were quite significant relative to its profit in the year to September 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Meiji Shipping Group.
Our Take On Meiji Shipping Group's Profit Performance
As we discussed above, we think the significant positive unusual item makes Meiji Shipping Group's earnings a poor guide to its underlying profitability. For this reason, we think that Meiji Shipping Group'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 on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. 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 a bit unpleasant!) that you ought to be aware of before buying any shares in Meiji Shipping Group.
Today we've zoomed in on a single data point to better understand the nature of Meiji Shipping Group'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. 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.
About TSE:9115
Meiji Shipping Group
Through its subsidiaries, engages in the maritime business in Japan and internationally.
Good value with imperfect balance sheet.
