We're Not So Sure You Should Rely on AqualisBraemar LOC's (OB:AQUA) Statutory Earnings

Statistically speaking, it is less risky to invest in profitable companies than in unprofitable ones. Having said that, sometimes statutory profit levels are not a good guide to ongoing profitability, because some short term one-off factor has impacted profit levels. This article will consider whether AqualisBraemar LOC's (OB:AQUA) statutory profits are a good guide to its underlying earnings.

It's good to see that over the last twelve months AqualisBraemar LOC made a profit of US$2.75m on revenue of US$76.2m. The good news is that the company managed to grow its revenue over the last three years, and also move from loss-making to profitable.

View our latest analysis for AqualisBraemar LOC

Not all profits are equal, and we can learn more about the nature of a company's past profitability by diving deeper into the financial statements. In this article we'll look at how AqualisBraemar LOC is impacting shareholders by issuing new shares. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of AqualisBraemar LOC.

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. AqualisBraemar LOC expanded the number of shares on issue by 31% over the last year. Therefore, each share now receives a smaller portion of profit. To talk about net income, without noticing earnings per share, is to be distracted by the big numbers while ignoring the smaller numbers that talk to per share value. Check out AqualisBraemar LOC's historical EPS growth by clicking on this link.

How Is Dilution Impacting AqualisBraemar LOC's Earnings Per Share? (EPS)

AqualisBraemar LOC was losing money three years ago. Even looking at the last year, profit was still down 76%. Sadly, earnings per share fell further, down a full 82% in that time. Therefore, one can observe that the dilution is having a fairly profound effect on shareholder returns.

In the long term, if AqualisBraemar LOC's earnings per share can increase, then the share price should too. But on the other hand, we'd be far less excited to learn profit (but not EPS) was improving. 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.

Our Take On AqualisBraemar LOC's Profit Performance

Over the last year AqualisBraemar LOC issued new shares and so, there's a noteworthy divergence between EPS and net income growth. Because of this, we think that it may be that AqualisBraemar LOC's statutory profits are better than its underlying earnings power. Sadly, its EPS was down over the last twelve months. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. If you want to do dive deeper into AqualisBraemar LOC, you'd also look into what risks it is currently facing. For example - AqualisBraemar LOC has 6 warning signs we think you should be aware of.

This note has only looked at a single factor that sheds light on the nature of AqualisBraemar LOC'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 that insiders are buying.

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This article by Simply Wall St is general in nature. 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.
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