Tenmaya Store's (TSE:9846) Earnings Offer More Than Meets The Eye

The market seemed underwhelmed by last week's earnings announcement from Tenmaya Store Co., Ltd. (TSE:9846) despite the healthy numbers. We did some analysis to find out why and believe that investors might be missing some encouraging factors contained in the earnings.

View our latest analysis for Tenmaya Store

How Do Unusual Items Influence Profit?

For anyone who wants to understand Tenmaya Store's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by JP¥531m 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. If Tenmaya Store 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 Tenmaya Store.

Our Take On Tenmaya Store's Profit Performance

Because unusual items detracted from Tenmaya Store's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Tenmaya Store's earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share have grown at 69% per year over the last three years. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. To help with this, we've discovered 2 warning signs (1 is a bit concerning!) that you ought to be aware of before buying any shares in Tenmaya Store.

This note has only looked at a single factor that sheds light on the nature of Tenmaya Store'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.