Jyoti Structures' (NSE:JYOTISTRUC) Solid Profits Have Weak Fundamentals

Jyoti Structures Limited's (NSE:JYOTISTRUC) robust earnings report didn't manage to move the market for its stock. Our analysis suggests that this might be because shareholders have noticed some concerning underlying factors.

View our latest analysis for Jyoti Structures

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. Jyoti Structures expanded the number of shares on issue by 20% 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 Jyoti Structures' EPS by clicking here.

How Is Dilution Impacting Jyoti Structures' Earnings Per Share (EPS)?

Three years ago, Jyoti Structures lost money. Zooming in to the last year, we still can't talk about growth rates coherently, since it made a loss last year. What we do know is that while it's great to see a profit over the last twelve months, that profit would have been better, on a per share basis, if the company hadn't needed to issue shares. And so, you can see quite clearly that dilution is influencing shareholder earnings.

If Jyoti Structures' EPS can grow over time then that drastically improves the chances of the share price moving in the same direction. But on the other hand, we'd be far less excited to learn profit (but not EPS) was improving. 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 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. Therefore, it seems possible to us that Jyoti Structures' true underlying earnings power is actually less than its statutory profit. The good news is that it earned a profit in the last twelve months, despite its previous loss. 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. 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 4 warning signs for Jyoti Structures (2 can't be ignored) you should be familiar with.

This note has only looked at a single factor that sheds light on the nature of Jyoti Structures' profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.