Guangdong Electric Power Development Co., Ltd.'s (SZSE:000539) solid earnings announcement recently didn't do much to the stock price. We did some analysis to find out why and believe that investors might be missing some encouraging factors contained in the earnings.

The Impact Of Unusual Items On Profit

To properly understand Guangdong Electric Power Development's profit results, we need to consider the CN¥1.4b 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, after all, that's exactly what the accounting terminology implies. If Guangdong Electric Power Development 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 Guangdong Electric Power Development's Profit Performance

Unusual items (expenses) detracted from Guangdong Electric Power Development's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Guangdong Electric Power Development's statutory profit actually understates its earnings potential! And the EPS is up 58% over 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 Guangdong Electric Power Development, you'd also look into what risks it is currently facing. Case in point: We've spotted 2 warning signs for Guangdong Electric Power Development you should be mindful of and 1 of these is significant.

This note has only looked at a single factor that sheds light on the nature of Guangdong Electric Power Development'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.