Shareholders Can Be Confident That SOMAR's (TSE:8152) Earnings Are High Quality

SOMAR Corporation (TSE:8152) recently posted some strong earnings, and the market responded positively. We have done some analysis, and we found several positive factors beyond the profit numbers.

See our latest analysis for SOMAR

The Impact Of Unusual Items On Profit

To properly understand SOMAR's profit results, we need to consider the JP¥389m expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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 SOMAR 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 SOMAR.

Our Take On SOMAR's Profit Performance

Because unusual items detracted from SOMAR's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that SOMAR's statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at an extremely impressive rate 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. If you want to do dive deeper into SOMAR, you'd also look into what risks it is currently facing. While conducting our analysis, we found that SOMAR has 2 warning signs and it would be unwise to ignore these.

This note has only looked at a single factor that sheds light on the nature of SOMAR'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.