Sangam (India)'s (NSE:SANGAMIND) Shareholders Have More To Worry About Than Only Soft Earnings

Sangam (India) Limited's (NSE:SANGAMIND) recent weak earnings report didn't cause a big stock movement. We think that investors are worried about some weaknesses underlying the earnings.

See our latest analysis for Sangam (India)

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. Sangam (India) expanded the number of shares on issue by 12% 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. You can see a chart of Sangam (India)'s EPS by clicking here.

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

Sangam (India) has improved its profit over the last three years, with an annualized gain of 870% in that time. But EPS was only up 688% per year, in the exact same period. Net profit actually dropped by 69% in the last year. Unfortunately for shareholders, though, the earnings per share result was even worse, declining 72%. And so, you can see quite clearly that dilution is influencing shareholder earnings.

If Sangam (India)'s EPS can grow over time then that drastically improves the chances of the share price moving in the same direction. However, if its profit increases while its earnings per share stay flat (or even fall) then shareholders might not see much benefit. 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 Sangam (India).

Our Take On Sangam (India)'s Profit Performance

Over the last year Sangam (India) issued new shares and so, there's a noteworthy divergence between EPS and net income growth. Because of this, we think that it may be that Sangam (India)'s statutory profits are better than its underlying earnings power. But the good news is that its EPS growth over the last three years has been very impressive. 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'd like to know more about Sangam (India) as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 4 warning signs for Sangam (India) (of which 1 doesn't sit too well with us!) you should know about.

This note has only looked at a single factor that sheds light on the nature of Sangam (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. 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.