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

Goodluck India Limited's (NSE:GOODLUCK) stock showed strength after its weak earnings report. We think that shareholders might be missing some concerning factors that our analysis found.

See our latest analysis for Goodluck India

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. As it happens, Goodluck India issued 6.5% more new shares over the last year. Therefore, each share now receives a smaller portion of profit. 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 Goodluck India's EPS by clicking here.

A Look At The Impact Of Goodluck India's Dilution on Its Earnings Per Share (EPS).

Goodluck India has improved its profit over the last three years, with an annualized gain of 88% in that time. Net income was down 11% over the last twelve months. Unfortunately for shareholders, though, the earnings per share result was even worse, declining 12%. So you can see that the dilution has had a bit of an impact on shareholders.

In the long term, if Goodluck India's earnings per share can increase, then the share price should too. 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 Goodluck India.

Our Take On Goodluck India's Profit Performance

Over the last year Goodluck 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 Goodluck India's statutory profits are better than its underlying earnings power. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Be aware that Goodluck India is showing 4 warning signs in our investment analysis and 1 of those is a bit concerning...

This note has only looked at a single factor that sheds light on the nature of Goodluck 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. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying to be useful.

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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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