Soft earnings didn't appear to concern Inner Mongolia MengDian HuaNeng Thermal Power Corporation Limited's (SHSE:600863) shareholders over the last week. We did some digging, and we believe the earnings are stronger than they seem.

The Impact Of Unusual Items On Profit

For anyone who wants to understand Inner Mongolia MengDian HuaNeng Thermal Power's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CN¥431m 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, after all, that's exactly what the accounting terminology implies. If Inner Mongolia MengDian HuaNeng Thermal Power 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 Inner Mongolia MengDian HuaNeng Thermal Power's Profit Performance

Unusual items (expenses) detracted from Inner Mongolia MengDian HuaNeng Thermal Power's earnings over the last year, but we might see an improvement next year. Because of this, we think Inner Mongolia MengDian HuaNeng Thermal Power's earnings potential is at least as good as it seems, and maybe even better! Better yet, its EPS are growing strongly, which is nice to see. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example - Inner Mongolia MengDian HuaNeng Thermal Power has 1 warning sign we think you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Inner Mongolia MengDian HuaNeng Thermal Power'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. 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.