We Think That There Are Issues Underlying AZUMA HOUSE's (TSE:3293) Earnings

AZUMA HOUSE Co., Ltd.'s (TSE:3293) robust earnings report didn't manage to move the market for its stock. Our analysis suggests that shareholders have noticed something concerning in the numbers.

See our latest analysis for AZUMA HOUSE

How Do Unusual Items Influence Profit?

Importantly, our data indicates that AZUMA HOUSE's profit received a boost of JP¥227m in unusual items, over the last year. 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 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. If AZUMA HOUSE doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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

Our Take On AZUMA HOUSE's Profit Performance

Arguably, AZUMA HOUSE's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that AZUMA HOUSE's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 25% per annum growth in EPS for the last three. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For instance, we've identified 3 warning signs for AZUMA HOUSE (2 are concerning) you should be familiar with.

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