We Think That There Are Issues Underlying Manaksia Coated Metals & Industries' (NSE:MANAKCOAT) Earnings

Despite posting some strong earnings, the market for Manaksia Coated Metals & Industries Limited's (NSE:MANAKCOAT) stock hasn't moved much. Our analysis suggests that this might be because shareholders have noticed some concerning underlying factors.

See our latest analysis for Manaksia Coated Metals & Industries

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, Manaksia Coated Metals & Industries issued 13% more new shares 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 Manaksia Coated Metals & Industries' EPS by clicking here.

How Is Dilution Impacting Manaksia Coated Metals & Industries' Earnings Per Share (EPS)?

As you can see above, Manaksia Coated Metals & Industries has been growing its net income over the last few years, with an annualized gain of 92% over three years. And the 20% profit boost in the last year certainly seems impressive at first glance. But in comparison, EPS only increased by 17% over the same period. And so, you can see quite clearly that dilution is influencing shareholder earnings.

In the long term, earnings per share growth should beget share price growth. So Manaksia Coated Metals & 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 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 Manaksia Coated Metals & Industries.

Our Take On Manaksia Coated Metals & Industries' Profit Performance

Each Manaksia Coated Metals & Industries share now gets a meaningfully smaller slice of its overall profit, due to dilution of existing shareholders. Therefore, it seems possible to us that Manaksia Coated Metals & Industries' true underlying earnings power is actually less than its statutory profit. But the good news is that its EPS growth over the last three years has been very impressive. 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. If you want to do dive deeper into Manaksia Coated Metals & Industries, you'd also look into what risks it is currently facing. To that end, you should learn about the 4 warning signs we've spotted with Manaksia Coated Metals & Industries (including 2 which are significant).

This note has only looked at a single factor that sheds light on the nature of Manaksia Coated Metals & Industries' profit. But there are plenty of other ways to inform your opinion of a company. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. 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.