ValueCommerce's (TSE:2491) Problems Go Beyond Weak Profit

Investors were disappointed by ValueCommerce Co., Ltd.'s (TSE:2491 ) latest earnings release. We did some further digging and think they have a few more reasons to be concerned beyond the statutory profit.

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The Impact Of Unusual Items On Profit

For anyone who wants to understand ValueCommerce's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from JP¥505m worth of unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On ValueCommerce's Profit Performance

Arguably, ValueCommerce's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that ValueCommerce's statutory profits are better than its underlying earnings power. The good news is that, its earnings per share increased by 30% in the last year. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. When we did our research, we found 2 warning signs for ValueCommerce (1 makes us a bit uncomfortable!) that we believe deserve your full attention.

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

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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.