Colliers International Group (TSE:CIGI) Strong Profits May Be Masking Some Underlying Issues

Colliers International Group Inc. (TSE:CIGI) just released a solid earnings report, and the stock displayed some strength. However, we think that shareholders should be cautious as we found some worrying factors underlying the profit.

Check out our latest analysis for Colliers International Group

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. Colliers International Group expanded the number of shares on issue by 11% over the last year. As a result, its net income is now split between 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. Check out Colliers International Group's historical EPS growth by clicking on this link.

A Look At The Impact Of Colliers International Group's Dilution On Its 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. On the bright side, in the last twelve months it grew profit by 42%. But EPS was less impressive, up only 35% in that time. So you can see that the dilution has had a bit of an impact on shareholders.

In the long term, earnings per share growth should beget share price growth. So it will certainly be a positive for shareholders if Colliers International Group can grow EPS persistently. 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.

The Impact Of Unusual Items On Profit

Alongside that dilution, it's also important to note that Colliers International Group's profit suffered from unusual items, which reduced profit by US$49m 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. Assuming those unusual expenses don't come up again, we'd therefore expect Colliers International Group to produce a higher profit next year, all else being equal.

Our Take On Colliers International Group's Profit Performance

To sum it all up, Colliers International Group 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 Colliers International Group's profits are an apt reflection of its underlying potential for profit. If you'd like to know more about Colliers International Group as a business, it's important to be aware of any risks it's facing. Be aware that Colliers International Group is showing 3 warning signs in our investment analysis and 1 of those doesn't sit too well with us...

Our examination of Colliers International Group has focussed on certain factors that can make its earnings look better than they are. But there are plenty of other ways to inform your opinion of a company. 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.