Immuno-Biological Laboratories' (TSE:4570) Earnings Are Weaker Than They Seem

Immuno-Biological Laboratories Co., Ltd.'s (TSE:4570) stock was strong after they recently reported robust earnings. However, we think that shareholders may be missing some concerning details in the numbers.

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An Unusual Tax Situation

Immuno-Biological Laboratories reported a tax benefit of JP¥24m, which is well worth noting. This is meaningful because companies usually pay tax rather than receive tax benefits. The receipt of a tax benefit is obviously a good thing, on its own. However, our data indicates that tax benefits can temporarily boost statutory profit in the year it is booked, but subsequently profit may fall back. Assuming the tax benefit is not repeated every year, we could see its profitability drop noticeably, all else being equal.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Immuno-Biological Laboratories.

Our Take On Immuno-Biological Laboratories' Profit Performance

Immuno-Biological Laboratories reported that it received a tax benefit, rather than paid tax, in its last report. As a result we don't think its profit result, which includes that tax-boost, is a good guide to its sustainable profit levels. Because of this, we think that it may be that Immuno-Biological Laboratories' statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 38% EPS growth in the last year. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. When we did our research, we found 2 warning signs for Immuno-Biological Laboratories (1 is a bit concerning!) that we believe deserve your full attention.

Today we've zoomed in on a single data point to better understand the nature of Immuno-Biological Laboratories' profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.