San-Ai Obbli's (TSE:8097) Shareholders Have More To Worry About Than Only Soft Earnings

A lackluster earnings announcement from San-Ai Obbli Co., Ltd. (TSE:8097) last week didn't sink the stock price. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

Check out our latest analysis for San-Ai Obbli

The Impact Of Unusual Items On Profit

Importantly, our data indicates that San-Ai Obbli's profit received a boost of JP¥1.2b in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. If San-Ai Obbli doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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

Our Take On San-Ai Obbli's Profit Performance

We'd posit that San-Ai Obbli's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that San-Ai Obbli's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 37% per annum growth in EPS for the last three. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. You'd be interested to know, that we found 1 warning sign for San-Ai Obbli and you'll want to know about it.

This note has only looked at a single factor that sheds light on the nature of San-Ai Obbli'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.

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.