Sakar Healthcare's (NSE:SAKAR) Anemic Earnings Might Be Worse Than You Think

Investors were disappointed by Sakar Healthcare Limited's (NSE:SAKAR ) latest earnings release. Our analysis has found some reasons to be concerned, beyond the weak headline numbers.

See our latest analysis for Sakar Healthcare

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. Sakar Healthcare expanded the number of shares on issue by 14% over the last year. As a result, its net income is now split between 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. Check out Sakar Healthcare's historical EPS growth by clicking on this link.

A Look At The Impact Of Sakar Healthcare's Dilution On Its Earnings Per Share (EPS)

As you can see above, Sakar Healthcare has been growing its net income over the last few years, with an annualized gain of 28% over three years. In comparison, earnings per share only gained 0.3% over the same period. Net income was down 14% over the last twelve months. But the EPS result was even worse, with the company recording a decline of 17%. And so, you can see quite clearly that dilution is influencing shareholder earnings.

If Sakar Healthcare's EPS can grow over time then that drastically improves the chances of the share price moving in the same direction. But on the other hand, we'd be far less excited to learn profit (but not EPS) was improving. 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 Sakar Healthcare.

Our Take On Sakar Healthcare's Profit Performance

Sakar Healthcare issued shares during the year, and that means its EPS performance lags its net income growth. Therefore, it seems possible to us that Sakar Healthcare's true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased in the last year. 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. If you'd like to know more about Sakar Healthcare as a business, it's important to be aware of any risks it's facing. For example - Sakar Healthcare has 2 warning signs we think you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Sakar Healthcare'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. 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.