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We Think That There Are More Issues For SABIC Agri-Nutrients (TADAWUL:2020) Than Just Sluggish Earnings
A lackluster earnings announcement from SABIC Agri-Nutrients Company (TADAWUL:2020) last week didn't sink the stock price. However, we believe that investors should be aware of some underlying factors which may be of concern.
Check out our latest analysis for SABIC Agri-Nutrients
One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. In fact, SABIC Agri-Nutrients increased the number of shares on issue by 14% 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 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 SABIC Agri-Nutrients' historical EPS growth by clicking on this link.
How Is Dilution Impacting SABIC Agri-Nutrients' Earnings Per Share? (EPS)
SABIC Agri-Nutrients has improved its profit over the last three years, with an annualized gain of 48% in that time. Net income was down 12% over the last twelve months. Unfortunately for shareholders, though, the earnings per share result was even worse, declining 12%. Therefore, the dilution is having a noteworthy influence on shareholder returns.
If SABIC Agri-Nutrients' 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 SABIC Agri-Nutrients' Profit Performance
SABIC Agri-Nutrients issued shares during the year, and that means its EPS performance lags its net income growth. Because of this, we think that it may be that SABIC Agri-Nutrients' statutory profits are better than its underlying earnings power. Nonetheless, it's still worth noting that its earnings per share have grown at 48% over the last three years. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. At Simply Wall St, we found 2 warning signs for SABIC Agri-Nutrients and we think they deserve your attention.
This note has only looked at a single factor that sheds light on the nature of SABIC Agri-Nutrients' 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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Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
About SASE:2020
SABIC Agri-Nutrients
Engages in the production, conversion, manufacturing, marketing, and trade of agri-nutrients and chemical products in the Kingdom of Saudi Arabia, the United States, Bangladesh, India, Singapore, and internationally.
Flawless balance sheet average dividend payer.