Aya Gold & Silver's (TSE:AYA) Conservative Accounting Might Explain Soft Earnings

Shareholders appeared unconcerned with Aya Gold & Silver Inc.'s (TSE:AYA) lackluster earnings report last week. Our analysis suggests that while the profits are soft, the foundations of the business are strong.

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One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. As it happens, Aya Gold & Silver issued 8.6% more new shares over the last year. That means its earnings are split among 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. You can see a chart of Aya Gold & Silver's EPS by clicking here.

How Is Dilution Impacting Aya Gold & Silver's Earnings Per Share (EPS)?

Three years ago, Aya Gold & Silver lost money. Even looking at the last year, profit was still down 68%. Sadly, earnings per share fell further, down a full 70% in that time. Therefore, the dilution is having a noteworthy influence on shareholder returns.

In the long term, if Aya Gold & Silver's earnings per share can increase, then the share price should too. 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?

On top of the dilution, we should also consider the US$25m impact of unusual items in the last year, which had the effect of suppressing profit. 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. Aya Gold & Silver took a rather significant hit from unusual items in the year to September 2025. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be.

Our Take On Aya Gold & Silver's Profit Performance

Aya Gold & Silver suffered from unusual items which depressed its profit in its last report; if that is not repeated then profit should be higher, all else being equal. 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. Based on these factors, we think that Aya Gold & Silver's profits are a reasonably conservative guide to its underlying profitability. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. While conducting our analysis, we found that Aya Gold & Silver has 2 warning signs and it would be unwise to ignore them.

Our examination of Aya Gold & Silver 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. 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.