Earnings Troubles May Signal Larger Issues for Brickability Group (LON:BRCK) Shareholders

Brickability Group Plc's (LON:BRCK) recent weak earnings report didn't cause a big stock movement. However, we believe that investors should be aware of some underlying factors which may be of concern.

Check out our latest analysis for Brickability Group

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. In fact, Brickability Group increased the number of shares on issue by 6.7% 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 Brickability Group's historical EPS growth by clicking on this link.

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

As you can see above, Brickability Group has been growing its net income over the last few years, with an annualized gain of 59% over three years. But EPS was only up 21% per year, in the exact same period. Net profit actually dropped by 45% in the last year. But the EPS result was even worse, with the company recording a decline of 45%. And so, you can see quite clearly that dilution is influencing shareholder earnings.

In the long term, if Brickability Group'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 Brickability Group's Profit Performance

Brickability Group issued shares during the year, and that means its EPS performance lags its net income growth. Therefore, it seems possible to us that Brickability Group's true underlying earnings power is actually less than its statutory profit. Nonetheless, it's still worth noting that its earnings per share have grown at 21% over the last three years. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. You'd be interested to know, that we found 3 warning signs for Brickability Group and you'll want to know about them.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com