BCL Industries (NSE:BCLIND) Posted Healthy Earnings But There Are Some Other Factors To Be Aware Of

Despite announcing strong earnings, BCL Industries Limited's (NSE:BCLIND) stock was sluggish. Our analysis uncovered some concerning factors that we believe the market might be paying attention to.

See our latest analysis for BCL Industries

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. In fact, BCL Industries increased the number of shares on issue by 26% over the last twelve months by issuing new shares. Therefore, each share now receives a smaller portion of profit. To celebrate net income while ignoring dilution is like rejoicing because you have a single slice of a larger pizza, but ignoring the fact that the pizza is now cut into many more slices. Check out BCL Industries' historical EPS growth by clicking on this link.

How Is Dilution Impacting BCL Industries' Earnings Per Share? (EPS)

As you can see above, BCL Industries has been growing its net income over the last few years, with an annualized gain of 134% over three years. But EPS was only up 50% per year, in the exact same period. And at a glance the 63% gain in profit over the last year impresses. But in comparison, EPS only increased by 39% over the same period. So you can see that the dilution has had a fairly significant impact on shareholders.

In the long term, earnings per share growth should beget share price growth. So BCL Industries shareholders will want to see that EPS figure continue to increase. However, if its profit increases while its earnings per share stay flat (or even fall) then shareholders might not see much benefit. 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 BCL Industries.

Our Take On BCL Industries' Profit Performance

BCL Industries shareholders should keep in mind how many new shares it is issuing, because, dilution clearly has the power to severely impact shareholder returns. Therefore, it seems possible to us that BCL Industries' true underlying earnings power is actually less than its statutory profit. Nonetheless, it's still worth noting that its earnings per share have grown at 50% over the last three years. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For instance, we've identified 5 warning signs for BCL Industries (1 is concerning) you should be familiar with.

Today we've zoomed in on a single data point to better understand the nature of BCL Industries' 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 that insiders are buying.

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This article by Simply Wall St is general in nature. 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.
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