Yamatane's (TSE:9305) Shareholders May Want To Dig Deeper Than Statutory Profit

Yamatane Corporation's (TSE:9305) healthy profit numbers didn't contain any surprises for investors. We think this is due to investors looking beyond the statutory profits and being concerned with what they see.

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To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. In fact, Yamatane increased the number of shares on issue by 7.1% over the last twelve months by issuing new shares. As a result, its net income is now split between a greater number of shares. Per share metrics like EPS help us understand how much actual shareholders are benefitting from the company's profits, while the net income level gives us a better view of the company's absolute size. You can see a chart of Yamatane's EPS by clicking here.

How Is Dilution Impacting Yamatane's Earnings Per Share (EPS)?

Yamatane has improved its profit over the last three years, with an annualized gain of 69% in that time. And the 27% profit boost in the last year certainly seems impressive at first glance. But in comparison, EPS only increased by 152% over the same period. And so, you can see quite clearly that dilution is influencing shareholder earnings.

Changes in the share price do tend to reflect changes in earnings per share, in the long run. So it will certainly be a positive for shareholders if Yamatane can grow EPS persistently. However, if its profit increases while its earnings per share stay flat (or even fall) then shareholders might not see much benefit. For that reason, you could say that EPS is more important that net income in the long run, assuming the goal is to assess whether a company's share price might grow.

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

How Do Unusual Items Influence Profit?

Finally, we should also consider the fact that unusual items boosted Yamatane's net profit by JP¥1.1b 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 crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And, after all, that's exactly what the accounting terminology implies. We can see that Yamatane's positive unusual items were quite significant relative to its profit in the year to March 2025. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

Our Take On Yamatane's Profit Performance

To sum it all up, Yamatane got a nice boost to profit from unusual items; without that, its statutory results would have looked worse. On top of that, the dilution means that its earnings per share performance is worse than its profit performance. Considering all this we'd argue Yamatane's profits probably give an overly generous impression of its sustainable level of profitability. If you want to do dive deeper into Yamatane, you'd also look into what risks it is currently facing. For instance, we've identified 3 warning signs for Yamatane (1 is significant) you should be familiar with.

Our examination of Yamatane has focussed on certain factors that can make its earnings look better than they are. And, on that basis, we are somewhat skeptical. But there are plenty of other ways to inform your opinion of a company. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. 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.