Mitsui Matsushima Holdings' (TSE:1518) Soft Earnings Don't Show The Whole Picture

Investors were disappointed with the weak earnings posted by Mitsui Matsushima Holdings Co., Ltd. (TSE:1518 ). Despite the soft profit numbers, our analysis has optimistic about the overall quality of the income statement.

Check out our latest analysis for Mitsui Matsushima Holdings

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Mitsui Matsushima Holdings' profit was reduced by JP¥2.5b, due to unusual items, over the last year. 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, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Mitsui Matsushima Holdings 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 Mitsui Matsushima Holdings.

Our Take On Mitsui Matsushima Holdings' Profit Performance

Unusual items (expenses) detracted from Mitsui Matsushima Holdings' earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Mitsui Matsushima Holdings' statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example, we've discovered 3 warning signs that you should run your eye over to get a better picture of Mitsui Matsushima Holdings.

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