J. Front Retailing's (TSE:3086) Sluggish Earnings Might Be Just The Beginning Of Its Problems

The market wasn't impressed with the soft earnings from J. Front Retailing Co., Ltd. (TSE:3086) recently. We did some further digging and think they have a few more reasons to be concerned beyond the statutory profit.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

The Impact Of Unusual Items On Profit

Importantly, our data indicates that J. Front Retailing's profit received a boost of JP¥3.3b 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. Which is hardly surprising, given the name. If J. Front Retailing doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current 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 J. Front Retailing's Profit Performance

We'd posit that J. Front Retailing's statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Because of this, we think that it may be that J. Front Retailing's statutory profits are better than its underlying earnings power. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. If you want to do dive deeper into J. Front Retailing, you'd also look into what risks it is currently facing. While conducting our analysis, we found that J. Front Retailing has 2 warning signs and it would be unwise to ignore these.

Today we've zoomed in on a single data point to better understand the nature of J. Front Retailing's profit. But there are plenty of other ways to inform your opinion of a company. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. 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.

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.