TSUKADA GLOBAL HOLDINGS' (TSE:2418) Shareholders May Want To Dig Deeper Than Statutory Profit

The market for TSUKADA GLOBAL HOLDINGS Inc.'s (TSE:2418) stock was strong after it released a healthy earnings report last week. However, we think that shareholders should be cautious as we found some worrying factors underlying the profit.

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How Do Unusual Items Influence Profit?

Importantly, our data indicates that TSUKADA GLOBAL HOLDINGS' profit received a boost of JP¥1.9b in unusual items, 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. If TSUKADA GLOBAL HOLDINGS doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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

Our Take On TSUKADA GLOBAL HOLDINGS' Profit Performance

Arguably, TSUKADA GLOBAL HOLDINGS' statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that TSUKADA GLOBAL HOLDINGS' statutory profits are better than its underlying earnings power. The good news is that, its earnings per share increased by 14% in the 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Case in point: We've spotted 3 warning signs for TSUKADA GLOBAL HOLDINGS you should be mindful of and 1 of these is a bit unpleasant.

This note has only looked at a single factor that sheds light on the nature of TSUKADA GLOBAL 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 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.