Solid Earnings Reflect Sagami Holdings' (TSE:9900) Strength As A Business

Even though Sagami Holdings Corporation's (TSE:9900) recent earnings release was robust, the market didn't seem to notice. Investors are probably missing some underlying factors which are encouraging for the future of the company.

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The Impact Of Unusual Items On 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¥413m 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. If Sagami Holdings 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 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 have grown at 11% per year over the last three years. 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. Just as investors must consider earnings, it is also important to take into account the strength of a company's balance sheet. You can see our latest analysis on Sagami Holdings' balance sheet health here.

Today we've zoomed in on a single data point to better understand the nature of Sagami Holdings' profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. 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.