Some Investors May Be Willing To Look Past Tenmaya Store's (TSE:9846) Soft Earnings

The market for Tenmaya Store Co., Ltd.'s (TSE:9846) shares didn't move much after it posted weak earnings recently. We think that the softer headline numbers might be getting counterbalanced by some positive underlying factors.

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How Do Unusual Items Influence Profit?

To properly understand Tenmaya Store's profit results, we need to consider the JP¥304m expense attributed to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. If Tenmaya Store doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

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

Our Take On Tenmaya Store's Profit Performance

Because unusual items detracted from Tenmaya Store's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Tenmaya Store's statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at 26% per year over the last three years. 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'd like to know more about Tenmaya Store as a business, it's important to be aware of any risks it's facing. You'd be interested to know, that we found 1 warning sign for Tenmaya Store and you'll want to know about it.

Today we've zoomed in on a single data point to better understand the nature of Tenmaya Store's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.