Impressive Earnings May Not Tell The Whole Story For MarketEnterpriseLtd (TSE:3135)

Last week's profit announcement from MarketEnterprise Co.,Ltd (TSE:3135) was underwhelming for investors, despite headline numbers being robust. We did some digging and found some worrying underlying problems.

See our latest analysis for MarketEnterpriseLtd

The Impact Of Unusual Items On Profit

For anyone who wants to understand MarketEnterpriseLtd's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from JP¥100m worth of unusual items. 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 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. And that's as you'd expect, given these boosts are described as 'unusual'. If MarketEnterpriseLtd doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of MarketEnterpriseLtd.

Our Take On MarketEnterpriseLtd's Profit Performance

We'd posit that MarketEnterpriseLtd'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 MarketEnterpriseLtd's statutory profits are better than its underlying earnings power. The good news is that it earned a profit in the last twelve months, despite its previous loss. 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. If you want to do dive deeper into MarketEnterpriseLtd, you'd also look into what risks it is currently facing. Our analysis shows 3 warning signs for MarketEnterpriseLtd (2 are significant!) and we strongly recommend you look at them before investing.

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

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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.