We Think You Can Look Beyond Seven & i Holdings' (TSE:3382) Lackluster Earnings

The most recent earnings report from Seven & i Holdings Co., Ltd. (TSE:3382) was disappointing for shareholders. However, our analysis suggests that the soft headline numbers are getting counterbalanced by some positive underlying factors.

Check out our latest analysis for Seven & i Holdings

How Do Unusual Items Influence Profit?

To properly understand Seven & i Holdings' profit results, we need to consider the JP¥230b expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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. In the twelve months to February 2024, Seven & i Holdings had a big unusual items expense. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be.

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 Seven & i Holdings' Profit Performance

As we mentioned previously, the Seven & i Holdings' profit was hampered by unusual items in the last year. Based on this observation, we consider it possible that Seven & i Holdings' statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at 25% per year 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Case in point: We've spotted 2 warning signs for Seven & i Holdings you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Seven & i 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 that insiders are buying.

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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.