Maxigen Biotech's (TWSE:1783) Earnings Are Of Questionable Quality

Despite posting some strong earnings, the market for Maxigen Biotech Inc.'s (TWSE:1783) stock hasn't moved much. We did some digging, and we found some concerning factors in the details.

See our latest analysis for Maxigen Biotech

The Impact Of Unusual Items On Profit

For anyone who wants to understand Maxigen Biotech's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from NT$14m 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. Assuming those unusual items don't show up again in the current year, we'd thus expect profit to be weaker next year (in the absence of business growth, that is).

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

Our Take On Maxigen Biotech's Profit Performance

Arguably, Maxigen Biotech's statutory earnings have been distorted by unusual items boosting profit. Therefore, it seems possible to us that Maxigen Biotech's true underlying earnings power is actually less than its statutory profit. But on the bright side, its earnings per share have grown at an extremely impressive rate 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. Just as investors must consider earnings, it is also important to take into account the strength of a company's balance sheet. We've done some analysis and you can see our take on Maxigen Biotech's balance sheet by clicking here.

This note has only looked at a single factor that sheds light on the nature of Maxigen Biotech's profit. But there are plenty of other ways to inform your opinion of a company. 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.