Why Man Infraconstruction's (NSE:MANINFRA) Shaky Earnings Are Just The Beginning Of Its Problems

A lackluster earnings announcement from Man Infraconstruction Limited (NSE:MANINFRA) last week didn't sink the stock price. We think that investors are worried about some weaknesses underlying the earnings.

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To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. In fact, Man Infraconstruction increased the number of shares on issue by 8.7% over the last twelve months by issuing new shares. As a result, its net income is now split between a greater number of shares. Per share metrics like EPS help us understand how much actual shareholders are benefitting from the company's profits, while the net income level gives us a better view of the company's absolute size. You can see a chart of Man Infraconstruction's EPS by clicking here.

A Look At The Impact Of Man Infraconstruction's Dilution On Its Earnings Per Share (EPS)

Man Infraconstruction has improved its profit over the last three years, with an annualized gain of 31% in that time. Net profit actually dropped by 5.9% in the last year. But the EPS result was even worse, with the company recording a decline of 6.2%. Therefore, the dilution is having a noteworthy influence on shareholder returns.

In the long term, if Man Infraconstruction's 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 Man Infraconstruction.

Our Take On Man Infraconstruction's Profit Performance

Man Infraconstruction 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 Man Infraconstruction's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 30% per annum growth in EPS for the last three. 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. If you want to do dive deeper into Man Infraconstruction, you'd also look into what risks it is currently facing. While conducting our analysis, we found that Man Infraconstruction has 1 warning sign and it would be unwise to ignore this.

Today we've zoomed in on a single data point to better understand the nature of Man Infraconstruction's 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 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.