Avino Silver & Gold Mines' (TSE:ASM) Earnings Are Weaker Than They Seem

Avino Silver & Gold Mines Ltd.'s (TSE:ASM) robust earnings report didn't manage to move the market for its stock. We did some digging, and we found some concerning factors in the details.

Check out our latest analysis for Avino Silver & Gold Mines

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. As it happens, Avino Silver & Gold Mines issued 16% more new shares over the last year. That means its earnings are split among a greater number of shares. Per share metrics like EPS help us understand how much actual shareholders are benefitting from the company's profits, while the net income level gives us a better view of the company's absolute size. Check out Avino Silver & Gold Mines' historical EPS growth by clicking on this link.

How Is Dilution Impacting Avino Silver & Gold Mines' Earnings Per Share (EPS)?

Three years ago, Avino Silver & Gold Mines lost money. Zooming in to the last year, we still can't talk about growth rates coherently, since it made a loss last year. What we do know is that while it's great to see a profit over the last twelve months, that profit would have been better, on a per share basis, if the company hadn't needed to issue shares. And so, you can see quite clearly that dilution is influencing shareholder earnings.

If Avino Silver & Gold Mines' 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.

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.

How Do Unusual Items Influence Profit?

Alongside that dilution, it's also important to note that Avino Silver & Gold Mines' profit suffered from unusual items, which reduced profit by US$1.9m in the last twelve months. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. 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 Avino Silver & Gold Mines doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

Our Take On Avino Silver & Gold Mines' Profit Performance

To sum it all up, Avino Silver & Gold Mines took a hit from unusual items which pushed its profit down; without that, it would have made more money. But on the other hand, the company issued more shares, so without buying more shares each shareholder will end up with a smaller part of the profit. Given the contrasting considerations, we don't have a strong view as to whether Avino Silver & Gold Mines's profits are an apt reflection of its underlying potential for profit. If you'd like to know more about Avino Silver & Gold Mines as a business, it's important to be aware of any risks it's facing. While conducting our analysis, we found that Avino Silver & Gold Mines has 2 warning signs and it would be unwise to ignore them.

Our examination of Avino Silver & Gold Mines has focussed on certain factors that can make its earnings look better than they are. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. 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 that insiders are buying 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.