Baran Group's (TLV:BRAN) Shareholders Have More To Worry About Than Only Soft Earnings

Baran Group Ltd's (TLV:BRAN) 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.

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One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. In fact, Baran Group increased the number of shares on issue by 18% over the last twelve months by issuing new shares. That means its earnings are split among a greater number of shares. 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 Baran Group's historical EPS growth by clicking on this link .

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

Baran Group has improved its profit over the last three years, with an annualized gain of 185% in that time. But EPS was only up 164% per year, in the exact same period. Net profit actually dropped by 2.0% in the last year. Unfortunately for shareholders, though, the earnings per share result was even worse, declining 8.8%. And so, you can see quite clearly that dilution is influencing shareholder earnings.

If Baran Group'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.

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

Our Take On Baran Group's Profit Performance

Baran Group issued shares during the year, and that means its EPS performance lags its net income growth. Because of this, we think that it may be that Baran Group's statutory profits are better than its underlying earnings power. But the good news is that its EPS growth over the last three years has been very impressive. 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. In terms of investment risks, we've identified 3 warning signs with Baran Group , and understanding these should be part of your investment process.

This note has only looked at a single factor that sheds light on the nature of Baran Group's profit. 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.