There May Be Some Bright Spots In Rogers Communications' (TSE:RCI.B) Earnings

Shareholders appeared unconcerned with Rogers Communications Inc.'s (TSE:RCI.B) lackluster earnings report last week. We think that the softer headline numbers might be getting counterbalanced by some positive underlying factors.

View our latest analysis for Rogers Communications

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. Rogers Communications expanded the number of shares on issue by 5.2% over the last year. That means its earnings are split among 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 Rogers Communications' EPS by clicking here.

A Look At The Impact Of Rogers Communications' Dilution On Its Earnings Per Share (EPS)

Rogers Communications' net profit dropped by 47% per year over the last three years. Even looking at the last year, profit was still down 49%. Sadly, earnings per share fell further, down a full 51% in that time. So you can see that the dilution has had a bit of an impact on shareholders.

If Rogers Communications' 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 Rogers Communications' profit suffered from unusual items, which reduced profit by CA$685m in the last twelve months. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Rogers Communications to produce a higher profit next year, all else being equal.

Our Take On Rogers Communications' Profit Performance

To sum it all up, Rogers Communications 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. Based on these factors, it's hard to tell if Rogers Communications' profits are a reasonable reflection of its underlying profitability. If you'd like to know more about Rogers Communications as a business, it's important to be aware of any risks it's facing. To help with this, we've discovered 5 warning signs (1 is concerning!) that you ought to be aware of before buying any shares in Rogers Communications.

Our examination of Rogers Communications 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. 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. 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.