Is There More To The Story Than Poenina Holding's (VTX:PNHO) Earnings Growth?

Statistically speaking, it is less risky to invest in profitable companies than in unprofitable ones. That said, the current statutory profit is not always a good guide to a company's underlying profitability. This article will consider whether Poenina Holding's (VTX:PNHO) statutory profits are a good guide to its underlying earnings.

It's good to see that over the last twelve months Poenina Holding made a profit of CHF11.5m on revenue of CHF246.8m. One positive is that it has grown both its profit and its revenue, over the last few years.

View our latest analysis for Poenina Holding

Of course, when it comes to statutory profit, the devil is often in the detail, and we can get a better sense for a company by diving deeper into the financial statements. In this article we will consider how Poenina Holding's decision to issue new shares in the company has impacted returns to shareholders. 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.

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. Poenina Holding expanded the number of shares on issue by 45% 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. You can see a chart of Poenina Holding's EPS by clicking here.

How Is Dilution Impacting Poenina Holding's Earnings Per Share? (EPS)

As you can see above, Poenina Holding has been growing its net income over the last few years, with an annualized gain of 100% over three years. But EPS was only up 0.8% per year, in the exact same period. And in the last year the company managed to bump profit up by 17%. On the other hand, earnings per share are only up 2.6% in that time. So you can see that the dilution has had a fairly significant 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 Poenina Holding can grow EPS persistently. 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.

Our Take On Poenina Holding's Profit Performance

As we discussed above, Poenina Holding's dilution over the last year has a major impact on its per-share earnings. As a result, we think it may well be the case that Poenina Holding's underlying earnings power is lower than its statutory profit. The good news is that its earnings per share increased slightly in 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. So while earnings quality is important, it's equally important to consider the risks facing Poenina Holding at this point in time. For example - Poenina Holding has 2 warning signs we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Poenina Holding's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. 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.

If you’re looking to trade Poenina Holding, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

This article by Simply Wall St is general in nature. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.