NIHON CHOUZAILtd's (TSE:3341) Conservative Accounting Might Explain Soft Earnings

Shareholders appeared unconcerned with NIHON CHOUZAI Co.,Ltd.'s (TSE:3341) lackluster earnings report last week. We did some digging, and we believe the earnings are stronger than they seem.

We've discovered 4 warning signs about NIHON CHOUZAILtd. View them for free.

The Impact Of Unusual Items On Profit

For anyone who wants to understand NIHON CHOUZAILtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by JP¥4.2b due to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. 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. In the twelve months to March 2025, NIHON CHOUZAILtd had a big unusual items expense. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be.

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 NIHON CHOUZAILtd's Profit Performance

As we discussed above, we think the significant unusual expense will make NIHON CHOUZAILtd's statutory profit lower than it would otherwise have been. Because of this, we think NIHON CHOUZAILtd's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! Unfortunately, though, its earnings per share actually fell back over the last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, NIHON CHOUZAILtd has 4 warning signs (and 2 which are a bit concerning) we think you should know about.

Today we've zoomed in on a single data point to better understand the nature of NIHON CHOUZAILtd'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.