We Think That There Are More Issues For Iino Kaiun Kaisha (TSE:9119) Than Just Sluggish Earnings

The subdued market reaction suggests that Iino Kaiun Kaisha, Ltd.'s (TSE:9119) recent earnings didn't contain any surprises. We think that investors are worried about some weaknesses underlying the earnings.

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The Impact Of Unusual Items On Profit

Importantly, our data indicates that Iino Kaiun Kaisha's profit received a boost of JP¥2.6b 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. Which is hardly surprising, given the name. 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 Iino Kaiun Kaisha.

Our Take On Iino Kaiun Kaisha's Profit Performance

Arguably, Iino Kaiun Kaisha's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Iino Kaiun Kaisha's statutory profits are better than its underlying earnings power. Nonetheless, it's still worth noting that its earnings per share have grown at 47% 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Case in point: We've spotted 2 warning signs for Iino Kaiun Kaisha you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Iino Kaiun Kaisha'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.