The market seemed underwhelmed by last week's earnings announcement from NRG Energy, Inc. (NYSE:NRG) despite the healthy numbers. We did some digging, and we think that investors are missing some encouraging factors in the underlying numbers.
Check out our latest analysis for NRG Energy
How Do Unusual Items Influence Profit?
For anyone who wants to understand NRG Energy's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by US$247m due 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 NRG Energy 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 NRG Energy's Profit Performance
Because unusual items detracted from NRG Energy'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 NRG Energy's earnings potential is at least as good as it seems, and maybe even better! And one can definitely find a positive in the fact that it made a profit this year, despite losing money last year. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. You'd be interested to know, that we found 1 warning sign for NRG Energy and you'll want to know about it.
Today we've zoomed in on a single data point to better understand the nature of NRG Energy's profit. But there are plenty of other ways to inform your opinion of a company. 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.
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