Statutory Profit Doesn't Reflect How Good Hachi-Ban's (TSE:9950) Earnings Are

The subdued stock price reaction suggests that Hachi-Ban Co., Ltd.'s (TSE:9950) strong earnings didn't offer any surprises. We think that investors have missed some encouraging factors underlying the profit figures.

View our latest analysis for Hachi-Ban

The Impact Of Unusual Items On Profit

For anyone who wants to understand Hachi-Ban's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by JP¥159m 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 that's hardly a surprise given these line items are considered unusual. Hachi-Ban took a rather significant hit from unusual items in the year to March 2024. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

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

Our Take On Hachi-Ban's Profit Performance

As we mentioned previously, the Hachi-Ban's profit was hampered by unusual items in the last year. Because of this, we think Hachi-Ban's underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! Furthermore, it has done a great job growing EPS over the last year. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. So while earnings quality is important, it's equally important to consider the risks facing Hachi-Ban at this point in time. For example - Hachi-Ban has 2 warning signs we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Hachi-Ban's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.