Earnings Troubles May Signal Larger Issues for Kuribayashi Steamship (TSE:9171) Shareholders

Despite Kuribayashi Steamship Co., Ltd.'s (TSE:9171) recent earnings report having lackluster headline numbers, the market responded positively. While shareholders may be willing to overlook soft profit numbers, we believe that they should also be taking into account some other factors which may be cause for concern.

See our latest analysis for Kuribayashi Steamship

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Kuribayashi Steamship's profit received a boost of JP¥643m 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. 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. We can see that Kuribayashi Steamship'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 Kuribayashi Steamship.

Our Take On Kuribayashi Steamship's Profit Performance

As we discussed above, we think the significant positive unusual item makes Kuribayashi Steamship's earnings a poor guide to its underlying profitability. For this reason, we think that Kuribayashi Steamship'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. If you'd like to know more about Kuribayashi Steamship as a business, it's important to be aware of any risks it's facing. Our analysis shows 3 warning signs for Kuribayashi Steamship (1 is a bit concerning!) and we strongly recommend you look at them before investing.

This note has only looked at a single factor that sheds light on the nature of Kuribayashi Steamship'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. 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.