Should You Rely On SW Umwelttechnik Stoiser & Wolschner's (VIE:SWUT) Earnings Growth?

It might be old fashioned, but we really like to invest in companies that make a profit, each and every year. Having said that, sometimes statutory profit levels are not a good guide to ongoing profitability, because some short term one-off factor has impacted profit levels. Today we'll focus on whether this year's statutory profits are a good guide to understanding SW Umwelttechnik Stoiser & Wolschner (VIE:SWUT).

We like the fact that SW Umwelttechnik Stoiser & Wolschner made a profit of €8.09m on its revenue of €97.2m, in the last year. One positive is that it has grown both its profit and its revenue, over the last few years.

View our latest analysis for SW Umwelttechnik Stoiser & Wolschner

Of course, when it comes to statutory profit, the devil is often in the detail, and we can get a better sense for a company by diving deeper into the financial statements. In this article we will consider how SW Umwelttechnik Stoiser & Wolschner's decision to issue new shares in the company has impacted returns to shareholders. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of SW Umwelttechnik Stoiser & Wolschner.

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. SW Umwelttechnik Stoiser & Wolschner expanded the number of shares on issue by 13% over the last year. As a result, its net income is now split between a greater number of shares. To talk about net income, without noticing earnings per share, is to be distracted by the big numbers while ignoring the smaller numbers that talk to per share value. Check out SW Umwelttechnik Stoiser & Wolschner's historical EPS growth by clicking on this link.

How Is Dilution Impacting SW Umwelttechnik Stoiser & Wolschner's Earnings Per Share? (EPS)

SW Umwelttechnik Stoiser & Wolschner has improved its profit over the last three years, with an annualized gain of 477% in that time. But EPS was only up 457% per year, in the exact same period. And at a glance the 78% gain in profit over the last year impresses. But in comparison, EPS only increased by 71% over the same period. So you can see that the dilution has had a bit of an impact on shareholders. Therefore, the dilution is having a noteworthy influence on shareholder returns. And so, you can see quite clearly that dilution is influencing shareholder earnings.

Changes in the share price do tend to reflect changes in earnings per share, in the long run. So SW Umwelttechnik Stoiser & Wolschner shareholders will want to see that EPS figure continue to increase. But on the other hand, we'd be far less excited to learn profit (but not EPS) was improving. For the ordinary retail shareholder, EPS is a great measure to check your hypothetical "share" of the company's profit.

Our Take On SW Umwelttechnik Stoiser & Wolschner's Profit Performance

SW Umwelttechnik Stoiser & Wolschner shareholders should keep in mind how many new shares it is issuing, because, dilution clearly has the power to severely impact shareholder returns. Therefore, it seems possible to us that SW Umwelttechnik Stoiser & Wolschner's true underlying earnings power is actually less than its statutory profit. But the good news is that its EPS growth over the last three years has been very impressive. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Every company has risks, and we've spotted 5 warning signs for SW Umwelttechnik Stoiser & Wolschner (of which 1 shouldn't be ignored!) you should know about.

Today we've zoomed in on a single data point to better understand the nature of SW Umwelttechnik Stoiser & Wolschner'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 that insiders are buying.

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This article by Simply Wall St is general in nature. 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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