Monument Mining's (CVE:MMY) Promising Earnings May Rest On Soft Foundations

Despite announcing strong earnings, Monument Mining Limited's (CVE:MMY) stock was sluggish. Our analysis uncovered some concerning factors that we believe the market might be paying attention to.

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One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. Monument Mining expanded the number of shares on issue by 5.1% over the last year. Therefore, each share now receives a smaller portion of profit. 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 Monument Mining's historical EPS growth by clicking on this link.

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

Monument Mining was losing money three years ago. The good news is that profit was up 373% in the last twelve months. On the other hand, earnings per share are only up 367% over the same period. Therefore, the dilution is having a noteworthy influence on shareholder returns.

In the long term, earnings per share growth should beget share price growth. So Monument Mining shareholders will want to see that EPS figure continue to increase. However, if its profit increases while its earnings per share stay flat (or even fall) then shareholders might not see much benefit. 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.

Our Take On Monument Mining's Profit Performance

Each Monument Mining share now gets a meaningfully smaller slice of its overall profit, due to dilution of existing shareholders. Because of this, we think that it may be that Monument Mining's statutory profits are better than its underlying earnings power. But the happy news is that, while acknowledging we have to look beyond the statutory numbers, those numbers are still improving, with EPS growing at a very high rate over the last year. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. If you want to do dive deeper into Monument Mining, you'd also look into what risks it is currently facing. At Simply Wall St, we found 1 warning sign for Monument Mining and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of Monument Mining's profit. 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.