Shree OSFM E-Mobility's (NSE:SHREEOSFM) Earnings Are Weaker Than They Seem

Shree OSFM E-Mobility Limited's (NSE:SHREEOSFM) robust earnings report didn't manage to move the market for its stock. We did some digging, and we found some concerning factors in the details.

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One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. In fact, Shree OSFM E-Mobility increased the number of shares on issue by 7.8% over the last twelve months by issuing new shares. Therefore, each share now receives a smaller portion of profit. 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 Shree OSFM E-Mobility's EPS by clicking here.

How Is Dilution Impacting Shree OSFM E-Mobility's Earnings Per Share (EPS)?

Shree OSFM E-Mobility has improved its profit over the last three years, with an annualized gain of 536% in that time. In comparison, earnings per share only gained 346% over the same period. And the 28% profit boost in the last year certainly seems impressive at first glance. On the other hand, earnings per share are pretty much flat, over the last twelve months. So you can see that the dilution has had a bit of an impact on shareholders.

If Shree OSFM E-Mobility'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.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Shree OSFM E-Mobility.

Our Take On Shree OSFM E-Mobility's Profit Performance

Shree OSFM E-Mobility shareholders should keep in mind how many new shares it is issuing, because, dilution clearly has the power to severely impact shareholder returns. Because of this, we think that it may be that Shree OSFM E-Mobility's statutory profits are better than its underlying earnings power. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. 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. If you want to do dive deeper into Shree OSFM E-Mobility, you'd also look into what risks it is currently facing. For example - Shree OSFM E-Mobility 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 Shree OSFM E-Mobility'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.