RenaissanceIncorporated's (TSE:2378) Promising Earnings May Rest On Soft Foundations

Renaissance,Incorporated's (TSE:2378) robust earnings report didn't manage to move the market for its stock. Our analysis suggests that shareholders have noticed something concerning in the numbers.

Check out our latest analysis for RenaissanceIncorporated

How Do Unusual Items Influence Profit?

For anyone who wants to understand RenaissanceIncorporated's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from JP¥130m worth of unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And that's as you'd expect, given these boosts are described as 'unusual'. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

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 RenaissanceIncorporated's Profit Performance

We'd posit that RenaissanceIncorporated's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that RenaissanceIncorporated's statutory profits are better than its underlying earnings power. On the bright side, the company showed enough improvement to book a profit this year, after losing money last year. 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 RenaissanceIncorporated, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 1 warning sign with RenaissanceIncorporated, and understanding this should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of RenaissanceIncorporated's 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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.