Larq's (WSE:LRQ) Earnings Might Not Be As Promising As They Seem

Solid profit numbers didn't seem to be enough to please Larq S.A.'s (WSE:LRQ) shareholders. Our analysis suggests they may be concerned about some underlying details.

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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. In fact, Larq increased the number of shares on issue by 23% over the last twelve months by issuing new shares. That means its earnings are split among a greater number of shares. 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 Larq's historical EPS growth by clicking on this link.

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

Three years ago, Larq lost money. The good news is that profit was up 4,253% in the last twelve months. On the other hand, earnings per share are only up 4,173% over the same period. And so, you can see quite clearly that dilution is influencing shareholder earnings.

Changes in the share price do tend to reflect changes in earnings per share, in the long run. So Larq shareholders will want to see that EPS figure continue to increase. 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 Larq.

How Do Unusual Items Influence Profit?

Alongside that dilution, it's also important to note that Larq's profit was boosted by unusual items worth zł13m in the last twelve months. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And, after all, that's exactly what the accounting terminology implies. Larq had a rather significant contribution from unusual items relative to its profit to June 2025. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

Our Take On Larq's Profit Performance

To sum it all up, Larq got a nice boost to profit from unusual items; without that, its statutory results would have looked worse. On top of that, the dilution means that its earnings per share performance is worse than its profit performance. Considering all this we'd argue Larq's profits probably give an overly generous impression of its sustainable level of profitability. If you'd like to know more about Larq as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 5 warning signs for Larq you should be mindful of and 1 of them can't be ignored.

Our examination of Larq has focussed on certain factors that can make its earnings look better than they are. And, on that basis, we are somewhat skeptical. 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.