We Think That There Are More Issues For Brødrene A & O Johansen (CPH:AOJ B) Than Just Sluggish Earnings

Investors were disappointed by Brødrene A & O Johansen A/S' (CPH:AOJ B ) latest earnings release. We did some further digging and think they have a few more reasons to be concerned beyond the statutory profit.

View our latest analysis for Brødrene A & O Johansen

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. Brødrene A & O Johansen expanded the number of shares on issue by 26% over the last year. Therefore, each share now receives a smaller portion of profit. 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 Brødrene A & O Johansen's EPS by clicking here.

A Look At The Impact Of Brødrene A & O Johansen's Dilution On Its Earnings Per Share (EPS)

Brødrene A & O Johansen's net profit dropped by 38% per year over the last three years. Even looking at the last year, profit was still down 39%. Sadly, earnings per share fell further, down a full 40% in that time. Therefore, one can observe that the dilution is having a fairly profound effect on shareholder returns.

If Brødrene A & O Johansen's EPS can grow over time then that drastically improves the chances of the share price moving in the same direction. 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.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Brødrene A & O Johansen.

Our Take On Brødrene A & O Johansen's Profit Performance

Brødrene A & O Johansen issued shares during the year, and that means its EPS performance lags its net income growth. Therefore, it seems possible to us that Brødrene A & O Johansen's true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over the last twelve months. 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 want to do dive deeper into Brødrene A & O Johansen, you'd also look into what risks it is currently facing. When we did our research, we found 4 warning signs for Brødrene A & O Johansen (1 doesn't sit too well with us!) that we believe deserve your full attention.

This note has only looked at a single factor that sheds light on the nature of Brødrene A & O Johansen'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.