Immuno-Biological Laboratories' (TSE:4570) Promising Earnings May Rest On Soft Foundations

Immuno-Biological Laboratories Co., Ltd. (TSE:4570) announced strong profits, but the stock was stagnant. We did some digging, and we found some concerning factors in the details.

Our free stock report includes 1 warning sign investors should be aware of before investing in Immuno-Biological Laboratories. Read for free now.

An Unusual Tax Situation

We can see that Immuno-Biological Laboratories received a tax benefit of JP¥39m. This is of course a bit out of the ordinary, given it is more common for companies to be paying tax than receiving tax benefits! We're sure the company was pleased with its tax benefit. However, the devil in the detail is that these kind of benefits only impact in the year they are booked, and are often one-off in nature. In the likely event the tax benefit is not repeated, we'd expect to see its statutory profit levels drop, at least in the absence of strong growth. While we think it's good that the company has booked a tax benefit, it does mean that there's every chance the statutory profit will come in a lot higher than it would be if the income was adjusted for one-off factors.

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. Given that sort of benefit is not recurring, a focus on the statutory profit might make the company seem better than it really is. 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 34% EPS growth in the last year. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. At Simply Wall St, we found 1 warning sign for Immuno-Biological Laboratories and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of Immuno-Biological Laboratories' profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.