Manaksia Coated Metals & Industries' (NSE:MANAKCOAT) Earnings Are Of Questionable Quality

Investors were disappointed with Manaksia Coated Metals & Industries Limited's (NSE:MANAKCOAT) earnings, despite the strong profit numbers. We think that the market might be paying attention to some underlying factors that they find to be concerning.

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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. Manaksia Coated Metals & Industries expanded the number of shares on issue by 41% over the last year. That means its earnings are split among 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. Check out Manaksia Coated Metals & Industries' historical EPS growth by clicking on this link.

A Look At The Impact Of Manaksia Coated Metals & Industries' Dilution On Its Earnings Per Share (EPS)

Manaksia Coated Metals & Industries has improved its profit over the last three years, with an annualized gain of 566% in that time. In comparison, earnings per share only gained 400% over the same period. And at a glance the 163% gain in profit over the last year impresses. On the other hand, earnings per share are only up 120% in that time. 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 it will certainly be a positive for shareholders if Manaksia Coated Metals & Industries can grow EPS persistently. 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 Manaksia Coated Metals & Industries.

Our Take On Manaksia Coated Metals & Industries' Profit Performance

As we discussed above, Manaksia Coated Metals & Industries' dilution over the last year has a major impact on its per-share earnings. For this reason, we think that Manaksia Coated Metals & Industries' statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Be aware that Manaksia Coated Metals & Industries is showing 2 warning signs in our investment analysis and 1 of those makes us a bit uncomfortable...

Today we've zoomed in on a single data point to better understand the nature of Manaksia Coated Metals & Industries' 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.