Solid Earnings May Not Tell The Whole Story For Freesia Macross (TSE:6343)

The recent earnings posted by Freesia Macross Corporation (TSE:6343) were solid, but the stock didn't move as much as we expected. We think this is due to investors looking beyond the statutory profits and being concerned with what they see.

See our latest analysis for Freesia Macross

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Freesia Macross' profit received a boost of JP¥123m 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 that's as you'd expect, given these boosts are described as 'unusual'. If Freesia Macross 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 Freesia Macross.

Our Take On Freesia Macross' Profit Performance

Arguably, Freesia Macross' statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Freesia Macross' statutory profits are better than its underlying earnings power. But the good news is that its EPS growth over the last three years has been very impressive. 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 want to do dive deeper into Freesia Macross, you'd also look into what risks it is currently facing. When we did our research, we found 2 warning signs for Freesia Macross (1 is significant!) that we believe deserve your full attention.

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