Why Yakiniku Sakai Holdings' (TSE:2694) Earnings Are Better Than They Seem

Yakiniku Sakai Holdings Inc.'s (TSE:2694) recent earnings report didn't offer any surprises, with the shares unchanged over the last week. We did some digging, and we think that investors are missing some encouraging factors in the underlying numbers.

Check out our latest analysis for Yakiniku Sakai Holdings

How Do Unusual Items Influence Profit?

To properly understand Yakiniku Sakai Holdings' profit results, we need to consider the JP¥262m 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. In the twelve months to September 2024, Yakiniku Sakai Holdings had a big unusual items expense. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be.

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

An Unusual Tax Situation

Just as we noted the unusual items, we must inform you that Yakiniku Sakai Holdings received a tax benefit which contributed JP¥133m to the bottom line. It's always a bit noteworthy when a company is paid by the tax man, rather than paying the tax man. The receipt of a tax benefit is obviously a good thing, on its own. However, the devil in the detail is that these kind of benefits only impact in the year they are booked, and are often one-off in nature. In the likely event the tax benefit is not repeated, we'd expect to see its statutory profit levels drop, at least in the absence of strong growth.

Our Take On Yakiniku Sakai Holdings' Profit Performance

In its last report Yakiniku Sakai Holdings received a tax benefit which might make its profit look better than it really is on a underlying level. Having said that, it also had a unusual item reducing its profit. Based on these factors, we think that Yakiniku Sakai Holdings' profits are a reasonably conservative guide to its underlying profitability. If you want to do dive deeper into Yakiniku Sakai Holdings, you'd also look into what risks it is currently facing. For example - Yakiniku Sakai Holdings has 1 warning sign we think you should be aware of.

Our examination of Yakiniku Sakai Holdings has focussed on certain factors that can make its earnings look better than they are. 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.