Polaris Holdings' (TSE:3010) Problems Go Beyond Weak Profit

The market rallied behind Polaris Holdings Co., Ltd.'s (TSE:3010) stock, leading do a rise in the share price after its recent weak earnings report. Sometimes, shareholders are willing to ignore soft numbers with the hope that they will improve, but our analysis suggests this is unlikely for Polaris Holdings.

We've discovered 4 warning signs about Polaris Holdings. View them for free.

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. As it happens, Polaris Holdings issued 88% more new shares over the last year. 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 Polaris Holdings' historical EPS growth by clicking on this link.

A Look At The Impact Of Polaris Holdings' Dilution On Its Earnings Per Share (EPS)

Three years ago, Polaris Holdings lost money. Even looking at the last year, profit was still down 21%. Like a sack of potatoes thrown from a delivery truck, EPS fell harder, down 37% in the same period. So you can see that the dilution has had a fairly significant impact on shareholders.

In the long term, if Polaris Holdings' 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 Polaris Holdings' Profit Performance

Polaris Holdings issued shares during the year, and that means its EPS performance lags its net income growth. As a result, we think it may well be the case that Polaris Holdings' underlying earnings power is lower 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. If you'd like to know more about Polaris Holdings as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 4 warning signs for Polaris Holdings you should be mindful of and 1 of them can't be ignored.

This note has only looked at a single factor that sheds light on the nature of Polaris Holdings' 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.