There May Be Reason For Hope In NEW ART HOLDINGS' (TSE:7638) Disappointing Earnings

NEW ART HOLDINGS Co., Ltd.'s (TSE:7638) stock was strong despite it releasing a soft earnings report last week. Our analysis suggests that investors may have noticed some promising signs beyond the statutory profit figures.

View our latest analysis for NEW ART HOLDINGS

How Do Unusual Items Influence Profit?

For anyone who wants to understand NEW ART HOLDINGS' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by JP¥445m due 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 that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect NEW ART HOLDINGS to produce a higher profit next year, all else being equal.

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

Unusual items (expenses) detracted from NEW ART HOLDINGS' earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that NEW ART HOLDINGS' statutory profit actually understates its earnings potential! 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. You'd be interested to know, that we found 3 warning signs for NEW ART HOLDINGS and you'll want to know about them.

Today we've zoomed in on a single data point to better understand 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.