Mitsuboshi Belting's (TSE:5192) Anemic Earnings Might Be Worse Than You Think

A lackluster earnings announcement from Mitsuboshi Belting Ltd. (TSE:5192) last week didn't sink the stock price. 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. Mitsuboshi Belting expanded the number of shares on issue by 9.4% 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 Mitsuboshi Belting's historical EPS growth by clicking on this link.

How Is Dilution Impacting Mitsuboshi Belting's Earnings Per Share (EPS)?

Mitsuboshi Belting's net profit dropped by 7.4% per year over the last three years. And even focusing only on the last twelve months, we see profit is down 29%. Sadly, earnings per share fell further, down a full 28% in that time. And so, you can see quite clearly that dilution is influencing shareholder earnings.

In the long term, if Mitsuboshi Belting'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.

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 Mitsuboshi Belting's Profit Performance

Over the last year Mitsuboshi Belting issued new shares and so, there's a noteworthy divergence between EPS and net income growth. Therefore, it seems possible to us that Mitsuboshi Belting's true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over the last twelve months. 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 while earnings quality is important, it's equally important to consider the risks facing Mitsuboshi Belting at this point in time. In terms of investment risks, we've identified 2 warning signs with Mitsuboshi Belting, and understanding these should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of Mitsuboshi Belting'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. 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.