Why Enel's (BIT:ENEL) Earnings Are Better Than They Seem

Enel SpA's (BIT:ENEL) recent earnings report didn't offer any surprises, with the shares unchanged over the last week. Our analysis suggests that shareholders might be missing some positive underlying factors in the earnings report.

View our latest analysis for Enel

How Do Unusual Items Influence Profit?

For anyone who wants to understand Enel's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by €1.7b 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 Enel 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 Enel's Profit Performance

Because unusual items detracted from Enel's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Enel's earnings potential is at least as good as it seems, and maybe even better! And the EPS is up 39% annually, 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 Enel, you'd also look into what risks it is currently facing. Case in point: We've spotted 2 warning signs for Enel you should be mindful of and 1 of them is a bit unpleasant.

Today we've zoomed in on a single data point to better understand the nature of Enel's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

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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.