Some Investors May Be Willing To Look Past Taikisha's (TSE:1979) Soft Earnings

The market was pleased with the recent earnings report from Taikisha Ltd. (TSE:1979), despite the profit numbers being soft. However, we think the company is showing some signs that things are more promising than they seem.

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How Do Unusual Items Influence Profit?

To properly understand Taikisha's profit results, we need to consider the JP¥2.7b expense attributed to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. 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 Taikisha 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 Taikisha's Profit Performance

Because unusual items detracted from Taikisha's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Taikisha's statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at 69% per year 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. You'd be interested to know, that we found 1 warning sign for Taikisha and you'll want to know about this.

This note has only looked at a single factor that sheds light on the nature of Taikisha's profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. 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.