There May Be Reason For Hope In Tsuruya's (TSE:5386) Disappointing Earnings

Soft earnings didn't appear to concern Tsuruya Co., Ltd.'s (TSE:5386) shareholders over the last week. Our analysis suggests that while the profits are soft, the foundations of the business are strong.

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The Impact Of Unusual Items On Profit

To properly understand Tsuruya's profit results, we need to consider the JP¥11m 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. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. 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 Tsuruya 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 Tsuruya.

Our Take On Tsuruya's Profit Performance

Because unusual items detracted from Tsuruya's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Tsuruya's earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share have grown at an extremely impressive rate over the last three years. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. If you'd like to know more about Tsuruya as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 4 warning signs for Tsuruya (of which 1 is concerning!) you should know about.

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