Guangdong Electric Power Development's (SZSE:000539) Strong Earnings Are Of Good Quality

Guangdong Electric Power Development Co., Ltd.'s (SZSE:000539) strong earnings report was rewarded with a positive stock price move. Our analysis found some more factors that we think are good for shareholders.

Check out our latest analysis for Guangdong Electric Power Development

How Do Unusual Items Influence Profit?

For anyone who wants to understand Guangdong Electric Power Development's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥1.8b due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. 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 Guangdong Electric Power Development doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming 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 Guangdong Electric Power Development's Profit Performance

Unusual items (expenses) detracted from Guangdong Electric Power Development's earnings over the last year, but we might see an improvement next year. Because of this, we think Guangdong Electric Power Development's earnings potential is at least as good as it seems, and maybe even better! And it's also positive that the company showed enough improvement to book a profit this year, after losing money last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. If you want to do dive deeper into Guangdong Electric Power Development, you'd also look into what risks it is currently facing. Case in point: We've spotted 2 warning signs for Guangdong Electric Power Development you should be mindful of and 1 of these shouldn't be ignored.

This note has only looked at a single factor that sheds light on the nature of Guangdong Electric Power Development's 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 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.