We Think That There Are Issues Underlying Scout24's (ETR:G24) Earnings

Scout24 SE's (ETR:G24) robust earnings report didn't manage to move the market for its stock. We did some digging, and we found some concerning factors in the details.

Check out our latest analysis for Scout24

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. In fact, Scout24 increased the number of shares on issue by 7.4% over the last twelve months by issuing new shares. As a result, its net income is now split between 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. Check out Scout24's historical EPS growth by clicking on this link.

A Look At The Impact Of Scout24's Dilution On Its Earnings Per Share (EPS)

As you can see above, Scout24 has been growing its net income over the last few years, with an annualized gain of 75% over three years. And at a glance the 45% gain in profit over the last year impresses. On the other hand, earnings per share are only up 53% in that time. And so, you can see quite clearly that dilution is influencing shareholder earnings.

In the long term, earnings per share growth should beget share price growth. So Scout24 shareholders will want to see that EPS figure continue to increase. 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 Scout24's Profit Performance

Each Scout24 share now gets a meaningfully smaller slice of its overall profit, due to dilution of existing shareholders. Therefore, it seems possible to us that Scout24's true underlying earnings power is actually less than its statutory profit. But the good news is that its EPS growth over the last three years has been very impressive. 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. If you'd like to know more about Scout24 as a business, it's important to be aware of any risks it's facing. In terms of investment risks, we've identified 2 warning signs with Scout24, and understanding them should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of Scout24'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 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.