Investors Can Find Comfort In Taiyen Biotech's (TWSE:1737) Earnings Quality

Shareholders appeared unconcerned with Taiyen Biotech Co., Ltd.'s (TWSE:1737) lackluster earnings report last week. We did some digging, and we believe the earnings are stronger than they seem.

Check out our latest analysis for Taiyen Biotech

How Do Unusual Items Influence Profit?

For anyone who wants to understand Taiyen Biotech's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by NT$48m due to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Taiyen Biotech to produce a higher profit next year, all else being equal.

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

Our Take On Taiyen Biotech's Profit Performance

Unusual items (expenses) detracted from Taiyen Biotech's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Taiyen Biotech's statutory profit actually understates its earnings potential! Unfortunately, though, its earnings per share actually fell back over 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. So while earnings quality is important, it's equally important to consider the risks facing Taiyen Biotech at this point in time. For example, we've discovered 2 warning signs that you should run your eye over to get a better picture of Taiyen Biotech.

Today we've zoomed in on a single data point to better understand the nature of Taiyen Biotech's 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 that insiders are buying.

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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.