Concerns Surrounding Virinchi's (NSE:VIRINCHI) Performance

The stock price didn't jump after Virinchi Limited (NSE:VIRINCHI) posted decent earnings last week. We think that investors might be worried about some concerning underlying factors.

Check out our latest analysis for Virinchi

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. In fact, Virinchi increased the number of shares on issue by 17% over the last twelve months by issuing new shares. 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. Check out Virinchi's historical EPS growth by clicking on this link.

How Is Dilution Impacting Virinchi's Earnings Per Share (EPS)?

Virinchi has improved its profit over the last three years, with an annualized gain of 399% in that time. In comparison, earnings per share only gained 275% over the same period. And in the last year the company managed to bump profit up by 6.6%. Meanwhile, EPS was flat over the same period. So you can see that the dilution has had a bit of an impact on shareholders.

If Virinchi'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 Virinchi.

Our Take On Virinchi's Profit Performance

Each Virinchi share now gets a meaningfully smaller slice of its overall profit, due to dilution of existing shareholders. Therefore, it seems possible to us that Virinchi's true underlying earnings power is actually less than its statutory profit. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. 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 Virinchi as a business, it's important to be aware of any risks it's facing. To help with this, we've discovered 3 warning signs (1 is significant!) that you ought to be aware of before buying any shares in Virinchi.

Today we've zoomed in on a single data point to better understand the nature of Virinchi's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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 that insiders are buying.

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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.