The Strong Earnings Posted By JVCKENWOOD (TSE:6632) Are A Good Indication Of The Strength Of The Business

The subdued stock price reaction suggests that JVCKENWOOD Corporation's (TSE:6632) strong earnings didn't offer any surprises. Investors are probably missing some underlying factors which are encouraging for the future of the company.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

How Do Unusual Items Influence Profit?

Importantly, our data indicates that JVCKENWOOD's profit was reduced by JP¥3.0b, 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 that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect JVCKENWOOD 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 JVCKENWOOD's Profit Performance

Unusual items (expenses) detracted from JVCKENWOOD's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that JVCKENWOOD's statutory profit actually understates its earnings potential! And on top of that, 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. So while earnings quality is important, it's equally important to consider the risks facing JVCKENWOOD at this point in time. At Simply Wall St, we found 1 warning sign for JVCKENWOOD and we think they deserve your attention.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.