Impressive Earnings May Not Tell The Whole Story For MIRARTH HOLDINGSInc (TSE:8897)

MIRARTH HOLDINGS,Inc.'s (TSE:8897) robust earnings report didn't manage to move the market for its stock. Our analysis suggests that this might be because shareholders have noticed some concerning underlying factors.

See our latest analysis for MIRARTH HOLDINGSInc

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. MIRARTH HOLDINGSInc expanded the number of shares on issue by 15% over the last year. Therefore, each share now receives a smaller portion of profit. To celebrate net income while ignoring dilution is like rejoicing because you have a single slice of a larger pizza, but ignoring the fact that the pizza is now cut into many more slices. You can see a chart of MIRARTH HOLDINGSInc's EPS by clicking here.

How Is Dilution Impacting MIRARTH HOLDINGSInc's Earnings Per Share (EPS)?

As you can see above, MIRARTH HOLDINGSInc has been growing its net income over the last few years, with an annualized gain of 74% over three years. And the 78% profit boost in the last year certainly seems impressive at first glance. On the other hand, earnings per share are only up 78% in that time. Therefore, the dilution is having a noteworthy influence on shareholder returns.

In the long term, earnings per share growth should beget share price growth. So it will certainly be a positive for shareholders if MIRARTH HOLDINGSInc can grow EPS persistently. However, if its profit increases while its earnings per share stay flat (or even fall) then shareholders might not see much benefit. For that reason, you could say that EPS is more important that net income in the long run, assuming the goal is to assess whether a company's share price might grow.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of MIRARTH HOLDINGSInc.

Our Take On MIRARTH HOLDINGSInc's Profit Performance

Each MIRARTH HOLDINGSInc share now gets a meaningfully smaller slice of its overall profit, due to dilution of existing shareholders. Because of this, we think that it may be that MIRARTH HOLDINGSInc's statutory profits are better than its underlying earnings power. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Every company has risks, and we've spotted 5 warning signs for MIRARTH HOLDINGSInc (of which 2 are a bit unpleasant!) you should know about.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com