Matica Fintec's (BIT:MFT) Problems Go Beyond Weak Profit

Matica Fintec S.p.A.'s (BIT:MFT) 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.

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In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. In fact, Matica Fintec increased the number of shares on issue by 216% 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. Check out Matica Fintec's historical EPS growth by clicking on this link.

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

As you can see above, Matica Fintec has been growing its net income over the last few years, with an annualized gain of 11% over three years. Net income was down 23% over the last twelve months. But the EPS result was even worse, with the company recording a decline of -26%. And so, you can see quite clearly that dilution is having a rather significant impact on shareholders.

Changes in the share price do tend to reflect changes in earnings per share, in the long run. So Matica Fintec 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 Matica Fintec's Profit Performance

Over the last year Matica Fintec issued new shares and so, there's a noteworthy divergence between EPS and net income growth. As a result, we think it may well be the case that Matica Fintec's underlying earnings power is lower 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. 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 2 warning signs for Matica Fintec you should be mindful of and 1 of these can't be ignored.

This note has only looked at a single factor that sheds light on the nature of Matica Fintec'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.