Stock Analysis

We Think That There Are More Issues For Orient Green Power (NSE:GREENPOWER) Than Just Sluggish Earnings

NSEI:GREENPOWER
Source: Shutterstock

Last week's earnings announcement from Orient Green Power Company Limited (NSE:GREENPOWER) was disappointing to investors, with a sluggish profit figure. We did some further digging and think they have a few more reasons to be concerned beyond the statutory profit.

View our latest analysis for Orient Green Power

earnings-and-revenue-history
NSEI:GREENPOWER Earnings and Revenue History November 18th 2024

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. In fact, Orient Green Power increased the number of shares on issue by 20% over the last twelve months by issuing new shares. Therefore, each share now receives a smaller portion of profit. To celebrate net income while ignoring dilution is like rejoicing because you have a single slice of a larger pizza, but ignoring the fact that the pizza is now cut into many more slices. You can see a chart of Orient Green Power's EPS by clicking here.

How Is Dilution Impacting Orient Green Power's Earnings Per Share (EPS)?

Orient Green Power has improved its profit over the last three years, with an annualized gain of 155% in that time. But EPS was only up 126% per year, in the exact same period. Net profit actually dropped by 63% in the last year. Unfortunately for shareholders, though, the earnings per share result was even worse, declining 67%. And so, you can see quite clearly that dilution is influencing shareholder earnings.

If Orient Green Power'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 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 Orient Green Power.

Our Take On Orient Green Power's Profit Performance

Orient Green Power issued shares during the year, and that means its EPS performance lags its net income growth. Because of this, we think that it may be that Orient Green Power'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. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. In terms of investment risks, we've identified 3 warning signs with Orient Green Power, and understanding them should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of Orient Green Power's profit. But there are plenty of other ways to inform your opinion of a company. 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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Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

About NSEI:GREENPOWER

Orient Green Power

An independent renewable energy company, owns, develops, and operates a portfolio of wind energy projects in India and Europe.

Adequate balance sheet low.

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