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The market for EnBW Energie Baden-Württemberg AG's (ETR:EBK) shares didn't move much after it posted weak earnings recently. Our analysis suggests that while the profits are soft, the foundations of the business are strong.
The Impact Of Unusual Items On Profit
To properly understand EnBW Energie Baden-Württemberg's profit results, we need to consider the €498m expense attributed 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 that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect EnBW Energie Baden-Württemberg to produce a higher profit next year, all else being equal.
Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of EnBW Energie Baden-Württemberg .
Our Take On EnBW Energie Baden-Württemberg's Profit Performance
Unusual items (expenses) detracted from EnBW Energie Baden-Württemberg's earnings over the last year, but we might see an improvement next year. Because of this, we think EnBW Energie Baden-Württemberg's earnings potential is at least as good as it seems, and maybe even better! And on top of that, its earnings per share have grown at an extremely impressive rate over the last three years. 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'd like to know more about EnBW Energie Baden-Württemberg as a business, it's important to be aware of any risks it's facing. For example, we've found that EnBW Energie Baden-Württemberg has 2 warning signs (1 makes us a bit uncomfortable!) 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 EnBW Energie Baden-Württemberg'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.