We Think That There Are More Issues For GENDA (TSE:9166) Than Just Sluggish Earnings

Last week's earnings announcement from GENDA Inc. (TSE:9166) was disappointing to investors, with a sluggish profit figure. We did some analysis, and found that there are some reasons to be cautious about the headline numbers.

View our latest analysis for GENDA

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. In fact, GENDA increased the number of shares on issue by 14% 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. You can see a chart of GENDA's EPS by clicking here.

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

GENDA has improved its profit over the last three years, with an annualized gain of 21% in that time. In contrast, earnings per share were actually down by 3.1% per year, in the exact same period. Net income was down 21% over the last twelve months. Unfortunately for shareholders, though, the earnings per share result was even worse, declining 28%. And so, you can see quite clearly that dilution is influencing shareholder earnings.

If GENDA's EPS can grow over time then that drastically improves the chances of the share price moving in the same direction. 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 GENDA's Profit Performance

GENDA issued shares during the year, and that means its EPS performance lags its net income growth. Therefore, it seems possible to us that GENDA's true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased in the last year. 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 want to do dive deeper into GENDA, you'd also look into what risks it is currently facing. When we did our research, we found 3 warning signs for GENDA (1 is concerning!) that we believe deserve your full attention.

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