DEUTZ's (ETR:DEZ) Sluggish Earnings Might Be Just The Beginning Of Its Problems

DEUTZ Aktiengesellschaft's (ETR:DEZ) recent weak earnings report didn't cause a big stock movement. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

View our latest analysis for DEUTZ

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. As it happens, DEUTZ issued 15% more new shares over the last year. That means its earnings are split among 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. You can see a chart of DEUTZ's EPS by clicking here.

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

DEUTZ was losing money three years ago. And even focusing only on the last twelve months, we see profit is down 35%. Sadly, earnings per share fell further, down a full 38% in that time. So you can see that the dilution has had a bit of an impact on shareholders.

In the long term, if DEUTZ'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 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 DEUTZ's Profit Performance

DEUTZ issued shares during the year, and that means its EPS performance lags its net income growth. Therefore, it seems possible to us that DEUTZ's true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased in the last year. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Case in point: We've spotted 4 warning signs for DEUTZ you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of DEUTZ'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. 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.