Arigatou Services Company's (TSE:3177) Earnings May Just Be The Starting Point

Arigatou Services Company, Limited (TSE:3177) just reported healthy earnings but the stock price didn't move much. We think that investors have missed some encouraging factors underlying the profit figures.

View our latest analysis for Arigatou Services Company

How Do Unusual Items Influence Profit?

To properly understand Arigatou Services Company's profit results, we need to consider the JP¥215m expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Arigatou Services Company to produce a higher profit next year, all else being equal.

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

Our Take On Arigatou Services Company's Profit Performance

Unusual items (expenses) detracted from Arigatou Services Company's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Arigatou Services Company's statutory profit actually understates its earnings potential! Better yet, its EPS are growing strongly, which is nice to see. 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. So while earnings quality is important, it's equally important to consider the risks facing Arigatou Services Company at this point in time. For example, we've discovered 3 warning signs that you should run your eye over to get a better picture of Arigatou Services Company.

This note has only looked at a single factor that sheds light on the nature of Arigatou Services Company'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

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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.