Empresa Nacional de Telecomunicaciones' (SNSE:ENTEL) Weak Earnings May Only Reveal A Part Of The Whole Picture

A lackluster earnings announcement from Empresa Nacional de Telecomunicaciones S.A. (SNSE:ENTEL) last week didn't sink the stock price. We think that investors are worried about some weaknesses underlying the earnings.

Check out our latest analysis for Empresa Nacional de Telecomunicaciones

How Do Unusual Items Influence Profit?

To properly understand Empresa Nacional de Telecomunicaciones' profit results, we need to consider the CL$42b gain attributed to unusual items. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And, after all, that's exactly what the accounting terminology implies. 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

We'd posit that Empresa Nacional de Telecomunicaciones' statutory earnings aren't a clean read on ongoing productivity, due to the large unusual item. Therefore, it seems possible to us that Empresa Nacional de Telecomunicaciones' true underlying earnings power is actually less than its statutory profit. Nonetheless, it's still worth noting that its earnings per share have grown at 5.2% over the last three years. 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. If you want to do dive deeper into Empresa Nacional de Telecomunicaciones, you'd also look into what risks it is currently facing. At Simply Wall St, we found 4 warning signs for Empresa Nacional de Telecomunicaciones and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of Empresa Nacional de Telecomunicaciones' 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.