Concerns Surrounding Globe Enterprises (India)'s (NSE:GLOBE) Performance

Globe Enterprises (India) Limited (NSE:GLOBE) just released a solid earnings report, and the stock displayed some strength. However, we think that shareholders should be cautious as we found some worrying factors underlying the profit.

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In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. In fact, Globe Enterprises (India) increased the number of shares on issue by 50% over the last twelve months by issuing new shares. As a result, its net income is now split between 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 Globe Enterprises (India)'s historical EPS growth by clicking on this link.

How Is Dilution Impacting Globe Enterprises (India)'s Earnings Per Share (EPS)?

Globe Enterprises (India) has improved its profit over the last three years, with an annualized gain of 33% in that time. In contrast, earnings per share were actually down by 68% per year, in the exact same period. And over the last 12 months, the company grew its profit by 15%. But earnings per share are actually down 51%, over the last twelve months. So you can see that the dilution has had a fairly significant impact on shareholders.

In the long term, if Globe Enterprises (India)'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 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 Globe Enterprises (India).

Our Take On Globe Enterprises (India)'s Profit Performance

As we discussed above, Globe Enterprises (India)'s dilution over the last year has a major impact on its per-share earnings. As a result, we think it may well be the case that Globe Enterprises (India)'s underlying earnings power is lower than its statutory profit. In further bad news, its earnings per share decreased 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. So while earnings quality is important, it's equally important to consider the risks facing Globe Enterprises (India) at this point in time. For example, we've found that Globe Enterprises (India) has 3 warning signs (2 make us uncomfortable!) 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 Globe Enterprises (India)'s 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.