NEW ART HOLDINGS' (TSE:7638) Soft Earnings Are Actually Better Than They Appear

Soft earnings didn't appear to concern NEW ART HOLDINGS Co., Ltd.'s (TSE:7638) shareholders over the last week. Our analysis suggests that while the profits are soft, the foundations of the business are strong.

View our latest analysis for NEW ART HOLDINGS

How Do Unusual Items Influence Profit?

To properly understand NEW ART HOLDINGS' profit results, we need to consider the JP¥439m expense attributed to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. If NEW ART HOLDINGS doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

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

Our Take On NEW ART HOLDINGS' Profit Performance

Because unusual items detracted from NEW ART HOLDINGS' earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think NEW ART HOLDINGS' earnings potential is at least as good as it seems, and maybe even better! On the other hand, its EPS actually shrunk in the last twelve months. 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. If you want to do dive deeper into NEW ART HOLDINGS, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 5 warning signs for NEW ART HOLDINGS (of which 2 are a bit concerning!) you should know about.

This note has only looked at a single factor that sheds light on the nature of NEW ART 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.