Naturgy Chile Gas Natural's (SNSE:NTGCLGAS) Soft Earnings Are Actually Better Than They Appear

Naturgy Chile Gas Natural S.A.'s (SNSE:NTGCLGAS) recent soft profit numbers didn't appear to worry shareholders, as the stock price showed strength. However, we think the company is showing some signs that things are more promising than they seem.

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The Impact Of Unusual Items On Profit

Importantly, our data indicates that Naturgy Chile Gas Natural's profit was reduced by CL$43b, due to unusual items, over the last year. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. If Naturgy Chile Gas Natural doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Naturgy Chile Gas Natural.

Our Take On Naturgy Chile Gas Natural's Profit Performance

Because unusual items detracted from Naturgy Chile Gas Natural's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Naturgy Chile Gas Natural's statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in 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. If you'd like to know more about Naturgy Chile Gas Natural as a business, it's important to be aware of any risks it's facing. You'd be interested to know, that we found 1 warning sign for Naturgy Chile Gas Natural and you'll want to know about it.

This note has only looked at a single factor that sheds light on the nature of Naturgy Chile Gas Natural'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.