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

The subdued market reaction suggests that Hubify Limited's (ASX:HFY) recent earnings didn't contain any surprises. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

View our latest analysis for Hubify

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. Hubify expanded the number of shares on issue by 22% over the last year. As a result, its net income is now split between 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. You can see a chart of Hubify's EPS by clicking here.

How Is Dilution Impacting Hubify's Earnings Per Share? (EPS)

As it happens, we don't know how much the company made or lost three years ago, because we don't have the data. And even focusing only on the last twelve months, we see profit is down 46%. Sadly, earnings per share fell further, down a full 64% in that time. So you can see that the dilution has had a bit of an impact on shareholders.

If Hubify's EPS can grow over time then that drastically improves the chances of the share price moving in the same direction. But on the other hand, we'd be far less excited to learn profit (but not EPS) was improving. For that reason, you could say that EPS is more important that net income in the long run, assuming the goal is to assess whether a company's share price might grow.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Hubify.

Our Take On Hubify's Profit Performance

Over the last year Hubify issued new shares and so, there's a noteworthy divergence between EPS and net income growth. Therefore, it seems possible to us that Hubify's true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased in the last year. 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. So while earnings quality is important, it's equally important to consider the risks facing Hubify at this point in time. For example, we've discovered 4 warning signs that you should run your eye over to get a better picture of Hubify.

This note has only looked at a single factor that sheds light on the nature of Hubify's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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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