Jubilee Metals Group's (LON:JLP) Problems Go Beyond Weak Profit

The subdued market reaction suggests that Jubilee Metals Group PLC's (LON:JLP) 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.

View our latest analysis for Jubilee Metals Group

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. In fact, Jubilee Metals Group increased the number of shares on issue by 9.8% 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. Check out Jubilee Metals Group's historical EPS growth by clicking on this link.

A Look At The Impact Of Jubilee Metals Group's Dilution On Its Earnings Per Share (EPS)

Unfortunately, Jubilee Metals Group's profit is down 89% per year over three years. And even focusing only on the last twelve months, we see profit is down 64%. Sadly, earnings per share fell further, down a full 66% in that time. And so, you can see quite clearly that dilution is influencing shareholder earnings.

If Jubilee Metals Group's EPS can grow over time then that drastically improves the chances of the share price moving in the same direction. However, if its profit increases while its earnings per share stay flat (or even fall) then shareholders might not see much benefit. 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.

The Impact Of Unusual Items On Profit

Alongside that dilution, it's also important to note that Jubilee Metals Group's profit was boosted by unusual items worth US$3.6m in the last twelve months. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And that's as you'd expect, given these boosts are described as 'unusual'. We can see that Jubilee Metals Group's positive unusual items were quite significant relative to its profit in the year to June 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Our Take On Jubilee Metals Group's Profit Performance

To sum it all up, Jubilee Metals Group got a nice boost to profit from unusual items; without that, its statutory results would have looked worse. On top of that, the dilution means that its earnings per share performance is worse than its profit performance. For the reasons mentioned above, we think that a perfunctory glance at Jubilee Metals Group's statutory profits might make it look better than it really is on an underlying level. If you want to do dive deeper into Jubilee Metals Group, you'd also look into what risks it is currently facing. While conducting our analysis, we found that Jubilee Metals Group has 3 warning signs and it would be unwise to ignore them.

In this article we've looked at a number of factors that can impair the utility of profit numbers, and we've come away cautious. 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 with significant insider holdings 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.