MARUKA FURUSATO's (TSE:7128) Shareholders Have More To Worry About Than Only Soft Earnings

The market rallied behind MARUKA FURUSATO Corporation's (TSE:7128) stock, leading do a rise in the share price after its recent weak earnings report. While shareholders may be willing to overlook soft profit numbers, we believe that they should also be taking into account some other factors which may be cause for concern.

Check out our latest analysis for MARUKA FURUSATO

How Do Unusual Items Influence Profit?

Importantly, our data indicates that MARUKA FURUSATO's profit received a boost of JP¥2.3b in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And, after all, that's exactly what the accounting terminology implies. MARUKA FURUSATO had a rather significant contribution from unusual items relative to its profit to June 2024. 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 MARUKA FURUSATO.

Our Take On MARUKA FURUSATO's Profit Performance

As we discussed above, we think the significant positive unusual item makes MARUKA FURUSATO's earnings a poor guide to its underlying profitability. For this reason, we think that MARUKA FURUSATO's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. The good news is that its earnings per share increased slightly in 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. 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. For example, MARUKA FURUSATO has 3 warning signs (and 1 which is significant) we think you should know about.

This note has only looked at a single factor that sheds light on the nature of MARUKA FURUSATO'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.