Earnings Troubles May Signal Larger Issues for Shyam Metalics and Energy (NSE:SHYAMMETL) Shareholders

The market wasn't impressed with the soft earnings from Shyam Metalics and Energy Limited (NSE:SHYAMMETL) recently. We did some further digging and think they have a few more reasons to be concerned beyond the statutory profit.

Check out our latest analysis for Shyam Metalics and Energy

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. In fact, Shyam Metalics and Energy increased the number of shares on issue by 9.0% over the last twelve months by issuing new shares. Therefore, each share now receives a smaller portion of profit. 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 Shyam Metalics and Energy's EPS by clicking here.

A Look At The Impact Of Shyam Metalics and Energy's Dilution On Its Earnings Per Share (EPS)

Shyam Metalics and Energy's net profit dropped by 43% per year over the last three years. Even looking at the last year, profit was still down 18%. Sadly, earnings per share fell further, down a full 22% in that time. Therefore, the dilution is having a noteworthy influence on shareholder returns.

If Shyam Metalics and Energy'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 the ordinary retail shareholder, EPS is a great measure to check your hypothetical "share" of the company's profit.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On Shyam Metalics and Energy's Profit Performance

Over the last year Shyam Metalics and Energy issued new shares and so, there's a noteworthy divergence between EPS and net income growth. Therefore, it seems possible to us that Shyam Metalics and Energy's true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over the last twelve months. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example - Shyam Metalics and Energy has 2 warning signs we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Shyam Metalics and Energy's 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. 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 with significant insider holdings to be useful.

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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.