We Think That There Are More Issues For Scope Metals Group (TLV:SCOP) Than Just Sluggish Earnings

Scope Metals Group Ltd.'s (TLV:SCOP) 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.

View our latest analysis for Scope Metals Group

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. In fact, Scope Metals Group increased the number of shares on issue by 5.9% over the last twelve months by issuing new shares. As a result, its net income is now split between 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 Scope Metals Group's historical EPS growth by clicking on this link.

How Is Dilution Impacting Scope Metals Group's Earnings Per Share? (EPS)

Scope Metals Group's net profit dropped by 32% per year over the last three years. And even focusing only on the last twelve months, we see profit is down 19%. Like a sack of potatoes thrown from a delivery truck, EPS fell harder, down 19% in the same period. Therefore, the dilution is having a noteworthy influence on shareholder returns.

In the long term, if Scope Metals Group's earnings per share can increase, then the share price should too. 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 Scope Metals Group.

Our Take On Scope Metals Group's Profit Performance

Over the last year Scope Metals Group issued new shares and so, there's a noteworthy divergence between EPS and net income growth. Therefore, it seems possible to us that Scope Metals Group's true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over the last 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For instance, we've identified 3 warning signs for Scope Metals Group (1 is a bit unpleasant) you should be familiar with.

This note has only looked at a single factor that sheds light on the nature of Scope Metals 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 that insiders are buying to be useful.

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This article by Simply Wall St is general in nature. 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.
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