Shareholders Can Be Confident That Advantage Risk Management's (TSE:8769) Earnings Are High Quality

Even though Advantage Risk Management Co., Ltd. (TSE:8769 ) posted strong earnings, investors appeared to be underwhelmed. We have done some analysis and have found some comforting factors beneath the profit numbers.

Our free stock report includes 4 warning signs investors should be aware of before investing in Advantage Risk Management. Read for free now.

The Impact Of Unusual Items On Profit

For anyone who wants to understand Advantage Risk Management's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by JP¥234m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Advantage Risk Management 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 Advantage Risk Management.

Our Take On Advantage Risk Management's Profit Performance

Unusual items (expenses) detracted from Advantage Risk Management's earnings over the last year, but we might see an improvement next year. Because of this, we think Advantage Risk Management's earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share have grown at an extremely impressive rate over the last three years. 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. For example, Advantage Risk Management has 4 warning signs (and 2 which are a bit concerning) we think you should know about.

Today we've zoomed in on a single data point to better understand the nature of Advantage Risk Management's 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.