Haruyama Holdings' (TSE:7416) Earnings Seem To Be Promising

The market seemed underwhelmed by last week's earnings announcement from Haruyama Holdings Inc. (TSE:7416) despite the healthy numbers. Our analysis suggests that shareholders might be missing some positive underlying factors in the earnings report.

View our latest analysis for Haruyama Holdings

The Impact Of Unusual Items On Profit

To properly understand Haruyama Holdings' profit results, we need to consider the JP¥265m expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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. Haruyama Holdings took a rather significant hit from unusual items in the year to September 2024. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

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

Our Take On Haruyama Holdings' Profit Performance

As we discussed above, we think the significant unusual expense will make Haruyama Holdings' statutory profit lower than it would otherwise have been. Because of this, we think Haruyama Holdings' underlying earnings potential is as good as, or possibly even better, than the statutory profit makes it seem! And on top of that, its earnings per share have grown at an extremely impressive rate over the last year. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. So while earnings quality is important, it's equally important to consider the risks facing Haruyama Holdings at this point in time. For example, we've discovered 2 warning signs that you should run your eye over to get a better picture of Haruyama Holdings.

Today we've zoomed in on a single data point to better understand the nature of Haruyama Holdings' profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. 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.