Retail Partners' (TSE:8167) Performance Is Even Better Than Its Earnings Suggest

Investors were underwhelmed by the solid earnings posted by Retail Partners Co., Ltd. (TSE:8167) recently. Our analysis says that investors should be optimistic, as the strong profit is built on solid foundations.

See our latest analysis for Retail Partners

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Retail Partners' profit was reduced by JP¥808m, due to unusual items, over the last year. 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. Assuming those unusual expenses don't come up again, we'd therefore expect Retail Partners to produce a higher profit next year, all else being equal.

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

Our Take On Retail Partners' Profit Performance

Unusual items (expenses) detracted from Retail Partners' earnings over the last year, but we might see an improvement next year. Because of this, we think Retail Partners' earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share increased by 65% in the last year. 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. Just as investors must consider earnings, it is also important to take into account the strength of a company's balance sheet. We've done some analysis and you can see our take on Retail Partners' balance sheet by clicking here.

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