Apex Biotechnology's (TWSE:1733) Conservative Accounting Might Explain Soft Earnings

Apex Biotechnology Corp.'s (TWSE:1733) stock was strong despite it releasing a soft earnings report last week. Our analysis suggests that investors may have noticed some promising signs beyond the statutory profit figures.

View our latest analysis for Apex Biotechnology

The Impact Of Unusual Items On Profit

For anyone who wants to understand Apex Biotechnology's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by NT$22m 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. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Apex Biotechnology 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 Apex Biotechnology.

Our Take On Apex Biotechnology's Profit Performance

Because unusual items detracted from Apex Biotechnology's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Apex Biotechnology's statutory profit actually understates its earnings potential! And the EPS is up 22% annually, over the last three years. 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. 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. Every company has risks, and we've spotted 2 warning signs for Apex Biotechnology you should know about.

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