Plan Optik's (ETR:P4O) Profits Appear To Have Quality Issues

Plan Optik AG's (ETR:P4O) healthy profit numbers didn't contain any surprises for investors. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers.

View our latest analysis for Plan Optik

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. In fact, Plan Optik increased the number of shares on issue by 6.0% over the last twelve months by issuing new shares. 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 Plan Optik's EPS by clicking here.

How Is Dilution Impacting Plan Optik's Earnings Per Share (EPS)?

Three years ago, Plan Optik lost money. On the bright side, in the last twelve months it grew profit by 22%. On the other hand, earnings per share are only up 8.7% over the same period. Therefore, the dilution is having a noteworthy influence on shareholder returns.

In the long term, earnings per share growth should beget share price growth. So Plan Optik shareholders will want to see that EPS figure continue to increase. But on the other hand, we'd be far less excited to learn profit (but not EPS) was improving. For the ordinary retail shareholder, EPS is a great measure to check your hypothetical "share" of the company's profit.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Plan Optik.

Our Take On Plan Optik's Profit Performance

Each Plan Optik share now gets a meaningfully smaller slice of its overall profit, due to dilution of existing shareholders. Because of this, we think that it may be that Plan Optik's statutory profits are better than its underlying earnings power. 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 Plan Optik as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 2 warning signs for Plan Optik you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Plan Optik's profit. But there are plenty of other ways to inform your opinion of a company. 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.

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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.