There May Be Underlying Issues With The Quality Of Aktor Societe Anonyme Holding Company Technical and Energy Projects' (ATH:AKTR) Earnings

Aktor Societe Anonyme Holding Company Technical and Energy Projects (ATH:AKTR) just reported some strong earnings, and the market reacted accordingly with a healthy uplift in the share price. However, we think that shareholders may be missing some concerning details in the numbers.

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To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. Aktor Societe Anonyme Holding Company Technical and Energy Projects expanded the number of shares on issue by 27% over the last year. 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 Aktor Societe Anonyme Holding Company Technical and Energy Projects' historical EPS growth by clicking on this link.

A Look At The Impact Of Aktor Societe Anonyme Holding Company Technical and Energy Projects' Dilution On Its Earnings Per Share (EPS)

Aktor Societe Anonyme Holding Company Technical and Energy Projects was losing money three years ago. Zooming in to the last year, we still can't talk about growth rates coherently, since it made a loss last year. What we do know is that while it's great to see a profit over the last twelve months, that profit would have been better, on a per share basis, if the company hadn't needed to issue shares. So you can see that the dilution has had a fairly significant impact on shareholders.

If Aktor Societe Anonyme Holding Company Technical and Energy Projects' 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.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Aktor Societe Anonyme Holding Company Technical and Energy Projects.

How Do Unusual Items Influence Profit?

On top of the dilution, we should also consider the €6.8m impact of unusual items in the last year, which had the effect of suppressing profit. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Aktor Societe Anonyme Holding Company Technical and Energy Projects to produce a higher profit next year, all else being equal.

Our Take On Aktor Societe Anonyme Holding Company Technical and Energy Projects' Profit Performance

Aktor Societe Anonyme Holding Company Technical and Energy Projects suffered from unusual items which depressed its profit in its last report; if that is not repeated then profit should be higher, all else being equal. But on the other hand, the company issued more shares, so without buying more shares each shareholder will end up with a smaller part of the profit. Having considered these factors, we don't think Aktor Societe Anonyme Holding Company Technical and Energy Projects' statutory profits give an overly harsh view of the business. If you want to do dive deeper into Aktor Societe Anonyme Holding Company Technical and Energy Projects, you'd also look into what risks it is currently facing. To that end, you should learn about the 3 warning signs we've spotted with Aktor Societe Anonyme Holding Company Technical and Energy Projects (including 1 which makes us a bit uncomfortable).

Our examination of Aktor Societe Anonyme Holding Company Technical and Energy Projects has focussed on certain factors that can make its earnings look better than they are. But there are plenty of other ways to inform your opinion of a company. 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. 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.