Tsuchiya Holdings' (TSE:1840) Profits Appear To Have Quality Issues

The recent earnings posted by Tsuchiya Holdings Co., Ltd. (TSE:1840) were solid, but the stock didn't move as much as we expected. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers.

View our latest analysis for Tsuchiya Holdings

The Impact Of Unusual Items On Profit

For anyone who wants to understand Tsuchiya Holdings' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from JP¥944m worth of unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. 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 Tsuchiya Holdings' positive unusual items were quite significant relative to its profit in the year to October 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

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

Our Take On Tsuchiya Holdings' Profit Performance

As we discussed above, we think the significant positive unusual item makes Tsuchiya Holdings' earnings a poor guide to its underlying profitability. For this reason, we think that Tsuchiya Holdings' statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. The silver lining is that its EPS growth over the last year has been really wonderful, even if it's not a perfect measure. 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 Tsuchiya Holdings as a business, it's important to be aware of any risks it's facing. You'd be interested to know, that we found 3 warning signs for Tsuchiya Holdings and you'll want to know about them.

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