Kyushu Railway's (TSE:9142) Soft Earnings Don't Show The Whole Picture

Shareholders appeared unconcerned with Kyushu Railway Company's (TSE:9142) lackluster earnings report last week. Our analysis suggests that while the profits are soft, the foundations of the business are strong.

View our latest analysis for Kyushu Railway

The Impact Of Unusual Items On Profit

For anyone who wants to understand Kyushu Railway's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by JP¥7.1b due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. If Kyushu Railway doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On Kyushu Railway's Profit Performance

Unusual items (expenses) detracted from Kyushu Railway's earnings over the last year, but we might see an improvement next year. Because of this, we think Kyushu Railway's earnings potential is at least as good as it seems, and maybe even better! Unfortunately, though, its earnings per share actually fell back 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. While conducting our analysis, we found that Kyushu Railway has 3 warning signs and it would be unwise to ignore them.

Today we've zoomed in on a single data point to better understand the nature of Kyushu Railway's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. 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.