Akatsuki's (TSE:3932) Soft Earnings Are Actually Better Than They Appear

The most recent earnings report from Akatsuki Inc. (TSE:3932) was disappointing for shareholders. While the headline numbers were soft, we believe that investors might be missing some encouraging factors.

View our latest analysis for Akatsuki

The Impact Of Unusual Items On Profit

Importantly, our data indicates that Akatsuki's profit was reduced by JP¥727m, due to unusual items, over the last year. 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 Akatsuki doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

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 Akatsuki's Profit Performance

Because unusual items detracted from Akatsuki'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 Akatsuki's statutory profit actually understates its earnings potential! And on top of that, its earnings per share increased by 5.1% in the last year. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For instance, we've identified 3 warning signs for Akatsuki (1 is a bit unpleasant) you should be familiar with.

Today we've zoomed in on a single data point to better understand the nature of Akatsuki'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 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.