Ya'acobi Brothers Group (YSB) (TLV:YAAC) Strong Profits May Be Masking Some Underlying Issues

Ya'acobi Brothers Group (YSB) Ltd's (TLV:YAAC) healthy profit numbers didn't contain any surprises for investors. However the statutory profit number doesn't tell the whole story, and we have found some factors which might be of concern to shareholders.

See our latest analysis for Ya'acobi Brothers Group (YSB)

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. As it happens, Ya'acobi Brothers Group (YSB) issued 18% more new shares over the last year. That means its earnings are split among a greater number of shares. To celebrate net income while ignoring dilution is like rejoicing because you have a single slice of a larger pizza, but ignoring the fact that the pizza is now cut into many more slices. Check out Ya'acobi Brothers Group (YSB)'s historical EPS growth by clicking on this link.

How Is Dilution Impacting Ya'acobi Brothers Group (YSB)'s Earnings Per Share? (EPS)

Ya'acobi Brothers Group (YSB) 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. But mathematics aside, it is always good to see when a formerly unprofitable business come good (though we accept profit would have been higher if dilution had not been required). Therefore, the dilution is having a noteworthy influence on shareholder returns.

If Ya'acobi Brothers Group (YSB)'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 Ya'acobi Brothers Group (YSB).

Our Take On Ya'acobi Brothers Group (YSB)'s Profit Performance

Ya'acobi Brothers Group (YSB) 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 Ya'acobi Brothers Group (YSB)'s statutory profits are better than its underlying earnings power. The good news is that it earned a profit in the last twelve months, despite its previous loss. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. When we did our research, we found 3 warning signs for Ya'acobi Brothers Group (YSB) (1 makes us a bit uncomfortable!) that we believe deserve your full attention.

This note has only looked at a single factor that sheds light on the nature of Ya'acobi Brothers Group (YSB)'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 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.