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What happened

Biopharma outsourcing services company Parexel International (NASDAQ:PRXL) was down as much as 15.5% this morning after filing a notice with the Securities and Exchange Commission that it would not be able to file its most recent quarterly report on time. Why not? It discovered that changes needed to be made to its fiscal 2017 first-quarter earnings, which ended on Sept. 30. That's usually an awful sign -- and investors are rightfully dismayed by the surprise news.

So what

The filing was an NT 10-Q, or a non-timely 10-Q notice, which alerts the SEC and shareholders that a company will not be able to submit its quarterly report, or 10-Q, within the usual allotment of time following the public announcement of quarterly earnings. That can happen for any number of reasons, but they're usually all red flags.

Parexel International's delay came after it discovered that it was not properly accounting for revenue and earnings from prior periods, including the most recent quarter that ended on Sept. 30. The filing shows that the company will be adjusting revenue $6.7 million lower and earnings per share (EPS) $0.08 lower from numbers first announced for its fiscal 2017 first quarter. Worse, the correction comes as the company's growth has been slipping this calendar year.

While that's not good news -- and investors still don't know what adjustments will be made to quarterly numbers further in the past -- the corrections included in the filing are relatively minor as far as what can usually go horribly wrong when a company files an NT 10-Q. Parexel International reported quarterly revenue of $580.7 million, so the adjustment amounts to a difference of just 1.2%. The EPS correction packs a bigger punch, as it lowers the reported figure of $0.75 to just $0.67, or a difference of 10.7%. 

Now what

This does not appear to be a worst-case scenario. Parexel International has a business that has been verified by the market, is still profitable, is still maintaining healthy growth in the top line, and has several favorable trends in the biopharma industry available to exploit. But if substantial other corrections are made to previous periods, then it may turn out that the company's business is not as profitable as investors had thought. That would be met with a lower stock price, which doesn't get better considering the stock is already at 52-week lows and down 19% year to date. Right now, there's no way to know the full impact until the delayed 10-Q is filed with the SEC, but investors don't appear to be taking any chances.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.