Despite posting strong earnings, Tokyo Kisen Co.,Ltd.’s (TSE:9193) stock didn’t move much over the last week. We looked deeper into the numbers and found that shareholders might be concerned with some underlying weaknesses.
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TSE:9193 Earnings and Revenue History November 23rd 2025 Zooming In On Tokyo KisenLtd’s Earnings
As finance nerds would already know, the accrual ratio from cashflow is a key measure for assessing how well a company’s free cash flow (FCF) matches its profit. The accrual ratio subtracts the FCF from the profit for a given period, and divides the result by the average operating assets of the company over that time. The ratio shows us how much a company’s profit exceeds its FCF.
That means a negative accrual ratio is a good thing, because it shows that the company is bringing in more free cash flow than its profit would suggest. While having an accrual ratio above zero is of little concern, we do think it’s worth noting when a company has a relatively high accrual ratio. That’s because some academic studies have suggested that high accruals ratios tend to lead to lower profit or less profit growth.
For the year to September 2025, Tokyo KisenLtd had an accrual ratio of 0.23. We can therefore deduce that its free cash flow fell well short of covering its statutory profit. In the last twelve months it actually had negative free cash flow, with an outflow of JP¥2.2b despite its profit of JP¥1.85b, mentioned above. We also note that Tokyo KisenLtd’s free cash flow was actually negative last year as well, so we could understand if shareholders were bothered by its outflow of JP¥2.2b. Having said that, there is more to the story. We can see that unusual items have impacted its statutory profit, and therefore the accrual ratio.
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How Do Unusual Items Influence Profit?
The fact that the company had unusual items boosting profit by JP¥2.5b, in the last year, probably goes some way to explain why its accrual ratio was so weak. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. We can see that Tokyo KisenLtd’s positive unusual items were quite significant relative to its profit in the year to September 2025. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.
Our Take On Tokyo KisenLtd’s Profit Performance
Summing up, Tokyo KisenLtd received a nice boost to profit from unusual items, but could not match its paper profit with free cash flow. Considering all this we’d argue Tokyo KisenLtd’s profits probably give an overly generous impression of its sustainable level of profitability. If you’d like to know more about Tokyo KisenLtd as a business, it’s important to be aware of any risks it’s facing. For example, we’ve found that Tokyo KisenLtd has 3 warning signs (1 can’t be ignored!) that deserve your attention before going any further with your analysis.
Our examination of Tokyo KisenLtd has focussed on certain factors that can make its earnings look better than they are. And, on that basis, we are somewhat skeptical. 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.
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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.
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