YouGov's (LON:YOU) Sluggish Earnings Might Be Just The Beginning Of Its Problems

Investors were disappointed by YouGov plc's (LON:YOU ) latest earnings release. We did some analysis, and found that there are some reasons to be cautious about the headline numbers.

Check out our latest analysis for YouGov

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. YouGov expanded the number of shares on issue by 5.5% over the last year. 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. You can see a chart of YouGov's EPS by clicking here.

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

As you can see above, YouGov has been growing its net income over the last few years, with an annualized gain of 177% over three years. In comparison, earnings per share only gained 166% over the same period. Net profit actually dropped by 15% in the last year. Unfortunately for shareholders, though, the earnings per share result was even worse, declining 18%. Therefore, the dilution is having a noteworthy influence on shareholder returns.

If YouGov'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.

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 YouGov's Profit Performance

Over the last year YouGov issued new shares and so, there's a noteworthy divergence between EPS and net income growth. Because of this, we think that it may be that YouGov's statutory profits are better than its underlying earnings power. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example, we've discovered 3 warning signs that you should run your eye over to get a better picture of YouGov.

This note has only looked at a single factor that sheds light on the nature of YouGov's profit. But there are plenty of other ways to inform your opinion of a company. 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 that insiders are buying.

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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.