Investors Shouldn't Be Too Comfortable With SAKAI HoldingsLTD's (TSE:9446) Earnings

SAKAI Holdings CO.,LTD's (TSE:9446) robust earnings report didn't manage to move the market for its stock. Our analysis suggests that shareholders have noticed something concerning in the numbers.

View our latest analysis for SAKAI HoldingsLTD

How Do Unusual Items Influence Profit?

Importantly, our data indicates that SAKAI HoldingsLTD's profit received a boost of JP¥495m in unusual items, over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. We can see that SAKAI HoldingsLTD's positive unusual items were quite significant relative to its profit in the year to September 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

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

Our Take On SAKAI HoldingsLTD's Profit Performance

As we discussed above, we think the significant positive unusual item makes SAKAI HoldingsLTD's earnings a poor guide to its underlying profitability. As a result, we think it may well be the case that SAKAI HoldingsLTD's underlying earnings power is lower than its statutory profit. But the good news is that its EPS growth over the last three years has been very impressive. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. If you'd like to know more about SAKAI HoldingsLTD as a business, it's important to be aware of any risks it's facing. When we did our research, we found 4 warning signs for SAKAI HoldingsLTD (1 is a bit unpleasant!) that we believe deserve your full attention.

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