Mitsuboshi's (TSE:5820) Promising Earnings May Rest On Soft Foundations

Despite posting some strong earnings, the market for Mitsuboshi Co., Ltd.'s (TSE:5820) stock hasn't moved much. Our analysis suggests that this might be because shareholders have noticed some concerning underlying factors.

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How Do Unusual Items Influence Profit?

For anyone who wants to understand Mitsuboshi's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from JP¥111m 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 crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. Which is hardly surprising, given the name. We can see that Mitsuboshi's positive unusual items were quite significant relative to its profit in the year to September 2025. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

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

Our Take On Mitsuboshi's Profit Performance

As we discussed above, we think the significant positive unusual item makes Mitsuboshi's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that Mitsuboshi's underlying earnings power is lower than its statutory profit. But the happy news is that, while acknowledging we have to look beyond the statutory numbers, those numbers are still improving, with EPS growing at a very high rate 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. So while earnings quality is important, it's equally important to consider the risks facing Mitsuboshi at this point in time. To that end, you should learn about the 3 warning signs we've spotted with Mitsuboshi (including 1 which is significant).

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