Izumi's (TSE:8273) Soft Earnings Don't Show The Whole Picture

Investors were disappointed with the weak earnings posted by Izumi Co., Ltd. (TSE:8273 ). Despite the soft profit numbers, our analysis has optimistic about the overall quality of the income statement.

Check out our latest analysis for Izumi

How Do Unusual Items Influence Profit?

To properly understand Izumi's profit results, we need to consider the JP¥3.1b 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 that's hardly a surprise given these line items are considered unusual. If Izumi doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming 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 Izumi's Profit Performance

Unusual items (expenses) detracted from Izumi's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Izumi's 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. If you'd like to know more about Izumi as a business, it's important to be aware of any risks it's facing. In terms of investment risks, we've identified 1 warning sign with Izumi, and understanding this should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of Izumi's 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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.