Jyoti Structures' (NSE:JYOTISTRUC) Shareholders Have More To Worry About Than Only Soft Earnings

The market rallied behind Jyoti Structures Limited's (NSE:JYOTISTRUC) stock, leading do a rise in the share price after its recent weak earnings report. While shareholders may be willing to overlook soft profit numbers, we believe that they should also be taking into account some other factors which may be cause for concern.

Check out our latest analysis for Jyoti Structures

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. Jyoti Structures expanded the number of shares on issue by 22% 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 Jyoti Structures' historical EPS growth by clicking on this link.

A Look At The Impact Of Jyoti Structures' Dilution On Its Earnings Per Share (EPS)

Jyoti Structures was losing money three years ago. Even looking at the last year, profit was still down 98%. Like a sack of potatoes thrown from a delivery truck, EPS fell harder, down 98% in the same period. Therefore, the dilution is having a noteworthy influence on shareholder returns.

In the long term, if Jyoti Structures' 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 Jyoti Structures.

Our Take On Jyoti Structures' Profit Performance

Jyoti Structures 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 Jyoti Structures' statutory profits are better than its underlying earnings power. 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 example, we've found that Jyoti Structures has 3 warning signs (1 is concerning!) that deserve your attention before going any further with your analysis.

Today we've zoomed in on a single data point to better understand the nature of Jyoti Structures' 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. 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.