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The market seemed underwhelmed by the solid earnings posted by Pembina Pipeline Corporation (TSE:PPL) recently. Along with the solid headline numbers, we think that investors have some reasons for optimism.
The Impact Of Unusual Items On Profit
For anyone who wants to understand Pembina Pipeline's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by CA$616m 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 Pembina Pipeline 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 Pembina Pipeline's Profit Performance
Unusual items (expenses) detracted from Pembina Pipeline's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that Pembina Pipeline's statutory profit actually understates its earnings potential! And the EPS is up 33% annually, 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Case in point: We've spotted 2 warning signs for Pembina Pipeline you should be aware of.
Today we've zoomed in on a single data point to better understand the nature of Pembina Pipeline'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 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.