Weak Statutory Earnings May Not Tell The Whole Story For Brødrene A & O Johansen (CPH:AOJ B)

Brødrene A & O Johansen A/S' (CPH:AOJ B) recent weak earnings report didn't cause a big stock movement. We think that investors are worried about some weaknesses underlying the earnings.

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. To celebrate net income while ignoring dilution is like rejoicing because you have a single slice of a larger pizza, but ignoring the fact that the pizza is now cut into many more slices. Check out Brødrene A & O Johansen's historical EPS growth by clicking on this link.

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 16% per year over the last three years. And even focusing only on the last twelve months, we see profit is down 43%. Sadly, earnings per share fell further, down a full 42% in that time. And so, you can see quite clearly that dilution is having a rather significant impact on shareholders.

In the long term, if Brødrene A & O Johansen'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.

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

Over the last year Brødrene A & O Johansen issued new shares and so, there's a noteworthy divergence between EPS and 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. In further bad news, its earnings per share decreased in the last year. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Case in point: We've spotted 4 warning signs for Brødrene A & O Johansen you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Brødrene A & O Johansen's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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. 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.