Impressive Earnings May Not Tell The Whole Story For Sinphar PharmaceuticalLtd (TWSE:1734)

Despite posting some strong earnings, the market for Sinphar Pharmaceutical Co.,Ltd.'s (TWSE:1734) stock hasn't moved much. Our analysis suggests that this might be because shareholders have noticed some concerning underlying factors.

Check out our latest analysis for Sinphar PharmaceuticalLtd

An Unusual Tax Situation

We can see that Sinphar PharmaceuticalLtd received a tax benefit of NT$51m. 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! Of course, prima facie it's great to receive a 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. 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 Sinphar PharmaceuticalLtd.

Our Take On Sinphar PharmaceuticalLtd's Profit Performance

As we have already discussed Sinphar PharmaceuticalLtd reported that it received a tax benefit, rather than paying tax, in the last year. Given that sort of benefit is not recurring, a focus on the statutory profit might make the company seem better than it really is. Therefore, it seems possible to us that Sinphar PharmaceuticalLtd's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 67% 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example - Sinphar PharmaceuticalLtd has 1 warning sign we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Sinphar PharmaceuticalLtd'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. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying to be useful.

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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.