Shareholders Can Be Confident That AEON FantasyLTD's (TSE:4343) Earnings Are High Quality

AEON Fantasy Co.,LTD.'s (TSE:4343) earnings announcement last week was disappointing for investors, despite the decent profit numbers. We have done some analysis and have found some comforting factors beneath the profit numbers.

View our latest analysis for AEON FantasyLTD

The Impact Of Unusual Items On Profit

For anyone who wants to understand AEON FantasyLTD's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by JP¥1.3b due 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, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect AEON FantasyLTD to produce a higher profit next year, all else being equal.

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 AEON FantasyLTD's Profit Performance

Unusual items (expenses) detracted from AEON FantasyLTD's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that AEON FantasyLTD's statutory profit actually understates its earnings potential! And one can definitely find a positive in the fact that it made a profit this year, despite losing money last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. So while earnings quality is important, it's equally important to consider the risks facing AEON FantasyLTD at this point in time. Every company has risks, and we've spotted 2 warning signs for AEON FantasyLTD you should know about.

This note has only looked at a single factor that sheds light on the nature of AEON FantasyLTD'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 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.