Sagami Holdings' (TSE:9900) Solid Earnings Are Supported By Other Strong Factors

Even though Sagami Holdings Corporation's (TSE:9900) recent earnings release was robust, the market didn't seem to notice. We think that investors have missed some encouraging factors underlying the profit figures.

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How Do Unusual Items Influence Profit?

For anyone who wants to understand Sagami Holdings' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by JP¥502m 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. 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 Sagami Holdings 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 Sagami Holdings.

Our Take On Sagami Holdings' Profit Performance

Unusual items (expenses) detracted from Sagami Holdings' earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Sagami Holdings' statutory profit actually understates its earnings potential! And on top of that, its earnings per share increased by 34% in the last year. 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. While it's very important to consider the profit and loss statement, you can also learn a lot about a company by looking at its balance sheet. If you're interested we have a graphic representation of Sagami Holdings' balance sheet.

Today we've zoomed in on a single data point to better understand the nature of Sagami Holdings' 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.