Solid Earnings May Not Tell The Whole Story For Scope Metals Group (TLV:SCOP)

Scope Metals Group Ltd.'s (TLV:SCOP) robust recent earnings didn't do much to move the stock. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. Scope Metals Group expanded the number of shares on issue by 7.5% over the last year. Therefore, each share now receives a smaller portion of profit. 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 Scope Metals Group's historical EPS growth by clicking on this link.

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

Unfortunately, Scope Metals Group's profit is down 37% per year over three years. On the bright side, in the last twelve months it grew profit by 2.1%. On the other hand, earnings per share are only up 2.0% over the same period. So you can see that the dilution has had a bit of an impact on shareholders.

Changes in the share price do tend to reflect changes in earnings per share, in the long run. So it will certainly be a positive for shareholders if Scope Metals Group can grow EPS persistently. But on the other hand, we'd be far less excited to learn profit (but not EPS) was improving. 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 Scope Metals Group.

Our Take On Scope Metals Group's Profit Performance

Scope Metals Group shareholders should keep in mind how many new shares it is issuing, because, dilution clearly has the power to severely impact shareholder returns. Therefore, it seems possible to us that Scope Metals Group's true underlying earnings power is actually less than its statutory profit. And we are pleased to note that EPS is at least heading in the right direction in the alst twelve months. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. If you'd like to know more about Scope Metals Group as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 2 warning signs for Scope Metals Group (of which 1 is potentially serious!) you should know about.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.