Weak Statutory Earnings May Not Tell The Whole Story For HusCompagniet (CPH:HUSCO)

The subdued market reaction suggests that HusCompagniet A/S' (CPH:HUSCO) recent earnings didn't contain any surprises. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

Check out our latest analysis for HusCompagniet

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. In fact, HusCompagniet increased the number of shares on issue by 19% over the last twelve months by issuing new shares. 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. Check out HusCompagniet's historical EPS growth by clicking on this link.

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

Unfortunately, HusCompagniet's profit is down 89% per year over three years. And even focusing only on the last twelve months, we see profit is down 91%. Like a sack of potatoes thrown from a delivery truck, EPS fell harder, down 92% in the same period. So you can see that the dilution has had a bit of an impact on shareholders.

In the long term, if HusCompagniet's earnings per share can increase, then the share price should too. 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.

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 HusCompagniet's Profit Performance

HusCompagniet issued shares during the year, and that means its EPS performance lags its net income growth. Therefore, it seems possible to us that HusCompagniet'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 while earnings quality is important, it's equally important to consider the risks facing HusCompagniet at this point in time. You'd be interested to know, that we found 2 warning signs for HusCompagniet and you'll want to know about these.

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