We Think That There Are Some Issues For Mitsubishi Estate (TSE:8802) Beyond Its Promising Earnings

Mitsubishi Estate Co., Ltd.'s (TSE:8802) robust recent earnings didn't do much to move the stock. We think this is due to investors looking beyond the statutory profits and being concerned with what they see.

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How Do Unusual Items Influence Profit?

Importantly, our data indicates that Mitsubishi Estate's profit received a boost of JP¥46b in unusual items, over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. 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 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. Nonetheless, it's still worth noting that its earnings per share have grown at 30% 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. At Simply Wall St, we found 1 warning sign for Mitsubishi Estate and we think they deserve your attention.

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.