We Think You Should Be Aware Of Some Concerning Factors In Engie Brasil Energia's (BVMF:EGIE3) Earnings

The recent earnings posted by Engie Brasil Energia S.A. (BVMF:EGIE3) were solid, but the stock didn't move as much as we expected. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers.

See our latest analysis for Engie Brasil Energia

How Do Unusual Items Influence Profit?

For anyone who wants to understand Engie Brasil Energia's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from R$1.4b worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. Which is hardly surprising, given the name. 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).

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.

Our Take On Engie Brasil Energia's Profit Performance

Arguably, Engie Brasil Energia's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Engie Brasil Energia's statutory profits are better than its underlying earnings power. Nonetheless, it's still worth noting that its earnings per share have grown at 65% over the last three years. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, we've found that Engie Brasil Energia has 4 warning signs (2 shouldn't be ignored!) that deserve your attention before going any further with your analysis.

Today we've zoomed in on a single data point to better understand the nature of Engie Brasil Energia's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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 with significant insider holdings 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.