We Think Edison International's (NYSE:EIX) Healthy Earnings Might Be Conservative

Edison International's (NYSE:EIX) 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.

Check out our latest analysis for Edison International

How Do Unusual Items Influence Profit?

Importantly, our data indicates that Edison International's profit was reduced by US$1.4b, due to unusual items, over the last year. 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, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Edison International to produce a higher profit next year, all else being equal.

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 Edison International's Profit Performance

Because unusual items detracted from Edison International'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 Edison International's statutory profit actually understates its earnings potential! And on top of that, its earnings per share have grown at 5.7% 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. If you'd like to know more about Edison International as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 3 warning signs for Edison International you should be mindful of and 2 of them make us uncomfortable.

This note has only looked at a single factor that sheds light on the nature of Edison International'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. 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.