Shibusawa Warehouse's (TSE:9304) Profits May Not Reveal Underlying Issues

The Shibusawa Warehouse Co., Ltd.'s (TSE:9304) robust recent earnings didn't do much to move the stock. However the statutory profit number doesn't tell the whole story, and we have found some factors which might be of concern to shareholders.

See our latest analysis for Shibusawa Warehouse

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Shibusawa Warehouse's profit received a boost of JP¥1.1b 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 Shibusawa Warehouse.

Our Take On Shibusawa Warehouse's Profit Performance

Arguably, Shibusawa Warehouse's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Shibusawa Warehouse's true underlying earnings power is actually less than its statutory profit. Nonetheless, it's still worth noting that its earnings per share have grown at 63% 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. So while earnings quality is important, it's equally important to consider the risks facing Shibusawa Warehouse at this point in time. Case in point: We've spotted 1 warning sign for Shibusawa Warehouse you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Shibusawa Warehouse's profit. But there are plenty of other ways to inform your opinion of a company. 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. 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.