We Think REN - Redes Energéticas Nacionais SGPS' (ELI:RENE) Healthy Earnings Might Be Conservative

REN - Redes Energéticas Nacionais, SGPS, S.A. (ELI:RENE) announced a healthy earnings result recently, and the market rewarded it with a strong uplift in the stock price. Looking deeper at the numbers, we found several encouraging factors beyond the headline profit numbers.

See our latest analysis for REN - Redes Energéticas Nacionais SGPS

The Impact Of Unusual Items On Profit

For anyone who wants to understand REN - Redes Energéticas Nacionais SGPS' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by €31m due to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. If REN - Redes Energéticas Nacionais SGPS 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 REN - Redes Energéticas Nacionais SGPS' Profit Performance

Because unusual items detracted from REN - Redes Energéticas Nacionais SGPS' 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 REN - Redes Energéticas Nacionais SGPS' statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at 41% per year over the last three years. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For instance, we've identified 3 warning signs for REN - Redes Energéticas Nacionais SGPS (2 are potentially serious) you should be familiar with.

Today we've zoomed in on a single data point to better understand the nature of REN - Redes Energéticas Nacionais SGPS' 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. 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 with significant insider holdings to be useful.

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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.