Investors Can Find Comfort In JSS' (TSE:6074) Earnings Quality

Shareholders appeared unconcerned with JSS Corporation's (TSE:6074) lackluster earnings report last week. We did some digging, and we believe the earnings are stronger than they seem.

View our latest analysis for JSS

The Impact Of Unusual Items On Profit

For anyone who wants to understand JSS' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by JP¥75m due 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. If JSS doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

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

Our Take On JSS' Profit Performance

Unusual items (expenses) detracted from JSS' earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that JSS' statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Case in point: We've spotted 1 warning sign for JSS you should be aware of.

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