Sega Sammy Holdings' (TSE:6460) Soft Earnings Are Actually Better Than They Appear

The market was pleased with the recent earnings report from Sega Sammy Holdings Inc. (TSE:6460), despite the profit numbers being soft. However, we think the company is showing some signs that things are more promising than they seem.

View our latest analysis for Sega Sammy Holdings

How Do Unusual Items Influence Profit?

For anyone who wants to understand Sega Sammy Holdings' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by JP¥17b due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. If Sega Sammy Holdings doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On Sega Sammy Holdings' Profit Performance

Unusual items (expenses) detracted from Sega Sammy Holdings' earnings over the last year, but we might see an improvement next year. Because of this, we think Sega Sammy Holdings' earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share have grown at an extremely impressive rate over the last three years. 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. If you want to do dive deeper into Sega Sammy Holdings, you'd also look into what risks it is currently facing. While conducting our analysis, we found that Sega Sammy Holdings has 3 warning signs and it would be unwise to ignore these bad boys.

This note has only looked at a single factor that sheds light on the nature of Sega Sammy Holdings' profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.