Mikuni's (TSE:7247) Profits May Not Reveal Underlying Issues

The market shrugged off Mikuni Corporation's (TSE:7247) solid earnings report. Our analysis showed that there are some concerning factors in the earnings that investors may be cautious of.

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How Do Unusual Items Influence Profit?

For anyone who wants to understand Mikuni's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from JP¥879m worth of unusual items. 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. And that's as you'd expect, given these boosts are described as 'unusual'. If Mikuni doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Mikuni.

Our Take On Mikuni's Profit Performance

Arguably, Mikuni's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Mikuni's statutory profits are better than its underlying earnings power. The silver lining is that its EPS growth over the last year has been really wonderful, even if it's not a perfect measure. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example - Mikuni has 4 warning signs we think you should be aware of.

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