Colt CZ Group's (SEP:CZG) Anemic Earnings Might Be Worse Than You Think

The subdued market reaction suggests that Colt CZ Group SE's (SEP:CZG) recent earnings didn't contain any surprises. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

Check out our latest analysis for Colt CZ Group

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. Colt CZ Group expanded the number of shares on issue by 62% 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 Colt CZ Group's historical EPS growth by clicking on this link.

How Is Dilution Impacting Colt CZ Group's Earnings Per Share (EPS)?

Colt CZ Group has improved its profit over the last three years, with an annualized gain of 10% in that time. But on the other hand, earnings per share actually fell by 9.2% per year. Net income was down 46% over the last twelve months. But the EPS result was even worse, with the company recording a decline of 56%. So you can see that the dilution has had a fairly significant impact on shareholders.

In the long term, if Colt CZ Group's earnings per share can increase, then the share price should too. 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.

Our Take On Colt CZ Group's Profit Performance

Over the last year Colt CZ Group issued new shares and so, there's a noteworthy divergence between EPS and net income growth. As a result, we think it may well be the case that Colt CZ Group's underlying earnings power is lower than its statutory profit. Sadly, its EPS was down over the last twelve months. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. 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. Our analysis shows 4 warning signs for Colt CZ Group (3 shouldn't be ignored!) and we strongly recommend you look at these before investing.

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