Italian Wine Brands' (BIT:IWB) Shareholders Have More To Worry About Than Only Soft Earnings

Italian Wine Brands S.p.A.'s (BIT:IWB) recent weak earnings report didn't cause a big stock movement. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

Check out our latest analysis for Italian Wine Brands

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. Italian Wine Brands expanded the number of shares on issue by 19% over the last year. As a result, its net income is now split between 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. You can see a chart of Italian Wine Brands' EPS by clicking here.

A Look At The Impact Of Italian Wine Brands' Dilution On Its Earnings Per Share (EPS)

Italian Wine Brands has improved its profit over the last three years, with an annualized gain of 77% in that time. Net profit actually dropped by 20% in the last year. But the EPS result was even worth, with the company recording a decline of 14%. So you can see that the dilution has had a bit of an impact on shareholders.

If Italian Wine Brands' 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.

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 Italian Wine Brands' Profit Performance

Over the last year Italian Wine Brands issued new shares and so, there's a noteworthy divergence between EPS and net income growth. Therefore, it seems possible to us that Italian Wine Brands' 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. 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. 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. For example, Italian Wine Brands has 3 warning signs (and 1 which is concerning) we think you should know about.

Today we've zoomed in on a single data point to better understand the nature of Italian Wine Brands' 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. 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 that insiders are buying 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.