Asian Granito India's (NSE:ASIANTILES) Earnings Are Weaker Than They Seem

Simply Wall St
June 07, 2021
Source: Shutterstock

Asian Granito India Limited (NSE:ASIANTILES) announced strong profits, but the stock was stagnant. We did some digging, and we found some concerning factors in the details.

See our latest analysis for Asian Granito India

NSEI:ASIANTILES Earnings and Revenue History June 8th 2021

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. Asian Granito India expanded the number of shares on issue by 23% over the last year. That means its earnings are split among a greater number of shares. 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 Asian Granito India's historical EPS growth by clicking on this link.

A Look At The Impact Of Asian Granito India's Dilution on Its Earnings Per Share (EPS).

Asian Granito India has improved its profit over the last three years, with an annualized gain of 8.3% in that time. And at a glance the 35% gain in profit over the last year impresses. On the other hand, earnings per share are only up 32% in that time. Therefore, the dilution is having a noteworthy influence on shareholder returns.

In the long term, earnings per share growth should beget share price growth. So it will certainly be a positive for shareholders if Asian Granito India 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.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Asian Granito India.

Our Take On Asian Granito India's Profit Performance

Asian Granito India 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 Asian Granito India's true underlying earnings power is actually less than its statutory profit. Nonetheless, it's still worth noting that its earnings per share have grown at 6.1% over the last three years. 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. 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 2 warning signs that you should run your eye over to get a better picture of Asian Granito India.

Today we've zoomed in on a single data point to better understand the nature of Asian Granito India's 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. 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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