Kvutzat Acro's (TLV:ACRO) Sluggish Earnings Might Be Just The Beginning Of Its Problems

The market rallied behind Kvutzat Acro Ltd's (TLV:ACRO) stock, leading do a rise in the share price after its recent weak earnings report. We think that shareholders might be missing some concerning factors that our analysis found.

Check out our latest analysis for Kvutzat Acro

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. As it happens, Kvutzat Acro issued 6.2% more new shares 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 Kvutzat Acro's EPS by clicking here.

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

Unfortunately, Kvutzat Acro's profit is down 22% per year over three years. Even looking at the last year, profit was still down 82%. Sadly, earnings per share fell further, down a full 83% in that time. And so, you can see quite clearly that dilution is influencing shareholder earnings.

If Kvutzat Acro'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 the ordinary retail shareholder, EPS is a great measure to check your hypothetical "share" of the company's profit.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Kvutzat Acro.

Our Take On Kvutzat Acro's Profit Performance

Kvutzat Acro issued shares during the year, and that means its EPS performance lags its net income growth. Therefore, it seems possible to us that Kvutzat Acro's true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over the last twelve months. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Be aware that Kvutzat Acro is showing 4 warning signs in our investment analysis and 2 of those are potentially serious...

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