One United Properties' (BVB:ONE) Problems Go Beyond Weak Profit

The subdued market reaction suggests that One United Properties SA's (BVB:ONE) recent earnings didn't contain any surprises. We think that investors are worried about some weaknesses underlying the earnings.

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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, One United Properties increased the number of shares on issue by 49% over the last twelve months by issuing new shares. As a result, its net income is now split between a greater number of shares. 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 One United Properties' EPS by clicking here .

A Look At The Impact Of One United Properties' Dilution On Its Earnings Per Share (EPS)

One United Properties' net profit dropped by 17% per year over the last three years. Even looking at the last year, profit was still down 22%. Sadly, earnings per share fell further, down a full 31% in that time. Therefore, one can observe that the dilution is having a fairly profound effect on shareholder returns.

If One United Properties' EPS can grow over time then that drastically improves the chances of the share price moving in the same direction. 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.

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 One United Properties' Profit Performance

Over the last year One United Properties issued new shares and so, there's a noteworthy divergence between EPS and net income growth. As a result, we think it may well be the case that One United Properties' underlying earnings power is lower 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 One United Properties, you'd also look into what risks it is currently facing. To help with this, we've discovered 2 warning signs (1 makes us a bit uncomfortable!) that you ought to be aware of before buying any shares in One United Properties.

This note has only looked at a single factor that sheds light on the nature of One United Properties' profit. But there are plenty of other ways to inform your opinion of a company. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful.

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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.