We Think That There Are More Issues For Atturra (ASX:ATA) Than Just Sluggish Earnings

Atturra Limited's (ASX:ATA) stock showed strength, with investors undeterred by its weak earnings report. We think that shareholders might be missing some concerning factors that our analysis found.

Check out our latest analysis for Atturra

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. In fact, Atturra increased the number of shares on issue by 34% over the last twelve months by issuing new shares. That means its earnings are split among a greater number of shares. To celebrate net income while ignoring dilution is like rejoicing because you have a single slice of a larger pizza, but ignoring the fact that the pizza is now cut into many more slices. Check out Atturra's historical EPS growth by clicking on this link.

A Look At The Impact Of Atturra's Dilution On Its Earnings Per Share (EPS)

Atturra has improved its profit over the last three years, with an annualized gain of 51% in that time. But on the other hand, earnings per share actually fell by 26% per year. Net profit actually dropped by 4.5% in the last year. Unfortunately for shareholders, though, the earnings per share result was even worse, declining 24%. So you can see that the dilution has had a fairly significant impact on shareholders.

In the long term, if Atturra's earnings per share can increase, then the share price should too. However, if its profit increases while its earnings per share stay flat (or even fall) then shareholders might not see much benefit. For the ordinary retail shareholder, EPS is a great measure to check your hypothetical "share" of the company's profit.

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 Atturra's Profit Performance

Atturra issued shares during the year, and that means its EPS performance lags its net income growth. For this reason, we think that Atturra's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. Sadly, its EPS was down over the last twelve months. 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. You'd be interested to know, that we found 1 warning sign for Atturra and you'll want to know about this.

This note has only looked at a single factor that sheds light on the nature of Atturra'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.