Stock Analysis

We Think That There Are More Issues For Sildarvinnslan Hf (ICE:SVN) Than Just Sluggish Earnings

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A lackluster earnings announcement from Sildarvinnslan Hf. (ICE:SVN) last week didn't sink the stock price. We think that investors are worried about some weaknesses underlying the earnings.

View our latest analysis for Sildarvinnslan Hf

ICSE:SVN Earnings and Revenue History March 17th 2023

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. Sildarvinnslan Hf expanded the number of shares on issue by 8.7% 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. Check out Sildarvinnslan Hf's historical EPS growth by clicking on this link.

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

As you can see above, Sildarvinnslan Hf has been growing its net income over the last few years, with an annualized gain of 72% over three years. Net profit actually dropped by 13% in the last year. But the EPS result was even worth, with the company recording a decline of 17%. Therefore, the dilution is having a noteworthy influence on shareholder returns.

In the long term, if Sildarvinnslan Hf's earnings per share can increase, then the share price should too. 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 Sildarvinnslan Hf.

Our Take On Sildarvinnslan Hf's Profit Performance

Over the last year Sildarvinnslan Hf issued new shares and so, there's a noteworthy divergence between EPS and net income growth. Therefore, it seems possible to us that Sildarvinnslan Hf's true underlying earnings power is actually less than its statutory profit. Nonetheless, it's still worth noting that its earnings per share have grown at 65% over the last three years. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Case in point: We've spotted 3 warning signs for Sildarvinnslan Hf you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Sildarvinnslan Hf'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 that insiders are buying.

Valuation is complex, but we're helping make it simple.

Find out whether Sildarvinnslan Hf is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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