Some Investors May Be Willing To Look Past Energa's (WSE:ENG) Soft Earnings

The market for Energa SA's (WSE:ENG) shares didn't move much after it posted weak earnings recently. We did some digging, and we believe the earnings are stronger than they seem.

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How Do Unusual Items Influence Profit?

To properly understand Energa's profit results, we need to consider the zł360m expense attributed to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. If Energa 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 Energa.

Our Take On Energa's Profit Performance

Unusual items (expenses) detracted from Energa's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Energa's statutory profit actually understates its earnings potential! On the other hand, its EPS actually shrunk in the last twelve months. 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 Energa, you'd also look into what risks it is currently facing. For example, we've found that Energa has 3 warning signs (1 is concerning!) that deserve your attention before going any further with your analysis.

Today we've zoomed in on a single data point to better understand the nature of Energa'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 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.