Mitsubishi Estate's (TSE:8802) Earnings Are Weaker Than They Seem

Despite announcing strong earnings, Mitsubishi Estate Co., Ltd.'s (TSE:8802) stock was sluggish. We think that the market might be paying attention to some underlying factors that they find to be concerning.

Check out our latest analysis for Mitsubishi Estate

How Do Unusual Items Influence Profit?

To properly understand Mitsubishi Estate's profit results, we need to consider the JP¥37b gain attributed to unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. Which is hardly surprising, given the name. 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 Mitsubishi Estate's Profit Performance

Arguably, Mitsubishi Estate's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Mitsubishi Estate's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 34% 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. 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. Our analysis shows 2 warning signs for Mitsubishi Estate (1 is a bit concerning!) and we strongly recommend you look at these before investing.

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

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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.