Nippon Gas' (TSE:8174) Earnings Offer More Than Meets The Eye

The market seemed underwhelmed by the solid earnings posted by Nippon Gas Co., Ltd. (TSE:8174) recently. We have done some analysis, and found some encouraging factors that we believe the shareholders should consider.

View our latest analysis for Nippon Gas

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Nippon Gas' profit was reduced by JP¥2.4b, due to unusual items, over the last year. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Nippon Gas to produce a higher profit next year, all else being equal.

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 Nippon Gas' Profit Performance

Because unusual items detracted from Nippon Gas' earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Nippon Gas' statutory profit actually understates its earnings potential! And the EPS is up 21% annually, over the last three years. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. At Simply Wall St, we found 1 warning sign for Nippon Gas and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of Nippon Gas' 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 that insiders are buying.

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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.