Mitani Sangyo's (TSE:8285) Earnings Are Weaker Than They Seem

Simply Wall St · 05/09 22:49

Despite posting some strong earnings, the market for Mitani Sangyo Co., Ltd.'s (TSE:8285) stock hasn't moved much. We did some digging, and we found some concerning factors in the details.

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earnings-and-revenue-history
TSE:8285 Earnings and Revenue History May 9th 2025

The Impact Of Unusual Items On Profit

For anyone who wants to understand Mitani Sangyo's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from JP¥920m worth of unusual items. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And, after all, that's exactly what the accounting terminology implies. We can see that Mitani Sangyo's positive unusual items were quite significant relative to its profit in the year to March 2025. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

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

Our Take On Mitani Sangyo's Profit Performance

As previously mentioned, Mitani Sangyo's large boost from unusual items won't be there indefinitely, so its statutory earnings are probably a poor guide to its underlying profitability. For this reason, we think that Mitani Sangyo's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. If you'd like to know more about Mitani Sangyo as a business, it's important to be aware of any risks it's facing. For example, we've discovered 2 warning signs that you should run your eye over to get a better picture of Mitani Sangyo.

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