Empresa Nacional de Telecomunicaciones' (SNSE:ENTEL) Problems Go Beyond Weak Profit

The market rallied behind Empresa Nacional de Telecomunicaciones S.A.'s (SNSE:ENTEL) stock, leading do a rise in the share price after its recent weak earnings report. Sometimes, shareholders are willing to ignore soft numbers with the hope that they will improve, but our analysis suggests this is unlikely for Empresa Nacional de Telecomunicaciones.

View our latest analysis for Empresa Nacional de Telecomunicaciones

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Empresa Nacional de Telecomunicaciones' profit received a boost of CL$42b in unusual items, over the last year. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. If Empresa Nacional de Telecomunicaciones doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

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 Empresa Nacional de Telecomunicaciones' Profit Performance

Arguably, Empresa Nacional de Telecomunicaciones' statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Empresa Nacional de Telecomunicaciones' statutory profits are better than its underlying earnings power. Sadly, its EPS was down over the last twelve months. 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 while earnings quality is important, it's equally important to consider the risks facing Empresa Nacional de Telecomunicaciones at this point in time. For example, we've discovered 4 warning signs that you should run your eye over to get a better picture of Empresa Nacional de Telecomunicaciones.

This note has only looked at a single factor that sheds light on the nature of Empresa Nacional de Telecomunicaciones' 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 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.