BENEFIT JAPAN's (TSE:3934) Earnings Are Of Questionable Quality

BENEFIT JAPAN Co., Ltd.'s (TSE:3934) 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 BENEFIT JAPAN

The Impact Of Unusual Items On Profit

Importantly, our data indicates that BENEFIT JAPAN's profit received a boost of JP¥167m 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. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And that's as you'd expect, given these boosts are described as 'unusual'. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

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

Our Take On BENEFIT JAPAN's Profit Performance

Arguably, BENEFIT JAPAN's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that BENEFIT JAPAN's statutory profits are better than its underlying earnings power. The good news is that, its earnings per share increased by 32% in the last year. 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 BENEFIT JAPAN 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 BENEFIT JAPAN, 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 BENEFIT JAPAN'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. 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.