PG Electroplast (NSE:PGEL) Posted Healthy Earnings But There Are Some Other Factors To Be Aware Of

PG Electroplast Limited's (NSE:PGEL) stock was strong after they recently reported robust earnings. We did some analysis and think that investors are missing some details hidden beneath the profit numbers.

Check out our latest analysis for PG Electroplast

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. As it happens, PG Electroplast issued 15% more new shares over the last year. As a result, its net income is now split between 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. You can see a chart of PG Electroplast's EPS by clicking here.

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

PG Electroplast has improved its profit over the last three years, with an annualized gain of 1,062% in that time. In comparison, earnings per share only gained 820% over the same period. And the 74% profit boost in the last year certainly seems impressive at first glance. But in comparison, EPS only increased by 53% over the same period. And so, you can see quite clearly that dilution is influencing shareholder earnings.

Changes in the share price do tend to reflect changes in earnings per share, in the long run. So PG Electroplast shareholders will want to see that EPS figure continue to increase. 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.

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 PG Electroplast's Profit Performance

Each PG Electroplast share now gets a meaningfully smaller slice of its overall profit, due to dilution of existing shareholders. Because of this, we think that it may be that PG Electroplast's statutory profits are better than its underlying earnings power. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example - PG Electroplast has 1 warning sign we think you should be aware of.

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