Some May Be Optimistic About Mitsuba's (TSE:7280) Earnings

Soft earnings didn't appear to concern Mitsuba Corporation's (TSE:7280) shareholders over the last week. We did some digging, and we believe the earnings are stronger than they seem.

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How Do Unusual Items Influence Profit?

To properly understand Mitsuba's profit results, we need to consider the JP¥2.4b expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. 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 Mitsuba to produce a higher profit next year, all else being equal.

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

Our Take On Mitsuba's Profit Performance

Unusual items (expenses) detracted from Mitsuba's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Mitsuba's statutory profit actually understates its earnings potential! 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. If you want to do dive deeper into Mitsuba, you'd also look into what risks it is currently facing. Case in point: We've spotted 1 warning sign for Mitsuba you should be aware of.

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

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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.