Apollo Pipes (NSE:APOLLOPIPE) Posted Healthy Earnings But There Are Some Other Factors To Be Aware Of

Apollo Pipes Limited (NSE:APOLLOPIPE) just reported some strong earnings, and the market reacted accordingly with a healthy uplift in the share price. However, we think that shareholders may be missing some concerning details in the numbers.

View our latest analysis for Apollo Pipes

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. As it happens, Apollo Pipes issued 5.1% more new shares 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. You can see a chart of Apollo Pipes' EPS by clicking here.

How Is Dilution Impacting Apollo Pipes' Earnings Per Share (EPS)?

Unfortunately, Apollo Pipes' profit is down 3.7% per year over three years. On the bright side, in the last twelve months it grew profit by 79%. But EPS was less impressive, up only 78% in that time. And so, you can see quite clearly that dilution is influencing shareholder earnings.

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 Apollo Pipes can grow EPS persistently. 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.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On Apollo Pipes' Profit Performance

Each Apollo Pipes share now gets a meaningfully smaller slice of its overall profit, due to dilution of existing shareholders. Because of this, we think that it may be that Apollo Pipes' statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 78% EPS growth in the last year. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Apollo Pipes.

This note has only looked at a single factor that sheds light on the nature of Apollo Pipes' profit. But there are plenty of other ways to inform your opinion of a company. 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 with high insider ownership.

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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.