Should You Use Emergent BioSolutions's (NYSE:EBS) Statutory Earnings To Analyse It?

Many investors consider it preferable to invest in profitable companies over unprofitable ones, because profitability suggests a business is sustainable. However, sometimes companies receive a one-off boost (or reduction) to their profit, and it's not always clear whether statutory profits are a good guide, going forward. In this article, we'll look at how useful this year's statutory profit is, when analysing Emergent BioSolutions (NYSE:EBS).

While Emergent BioSolutions was able to generate revenue of US$1.26b in the last twelve months, we think its profit result of US$170.3m was more important.

Check out our latest analysis for Emergent BioSolutions

Not all profits are equal, and we can learn more about the nature of a company's past profitability by diving deeper into the financial statements. This article will focus on the impact unusual items have had on Emergent BioSolutions' statutory earnings. That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

The Impact Of Unusual Items On Profit

For anyone who wants to understand Emergent BioSolutions' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by US$36.8m 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 Emergent BioSolutions to produce a higher profit next year, all else being equal.

Our Take On Emergent BioSolutions' Profit Performance

Because unusual items detracted from Emergent BioSolutions' earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Emergent BioSolutions' earnings potential is at least as good as it seems, and maybe even better! And one can definitely find a positive in the fact that it made a profit this year, despite losing money 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Every company has risks, and we've spotted 5 warning signs for Emergent BioSolutions (of which 1 is potentially serious!) you should know about.

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