Idun Industrier (STO:IDUN B) Posted Healthy Earnings But There Are Some Other Factors To Be Aware Of

Investors were disappointed with Idun Industrier AB (publ)'s (STO:IDUN B) earnings, despite the strong profit numbers. We think that the market might be paying attention to some underlying factors that they find to be concerning.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. In fact, Idun Industrier increased the number of shares on issue by 8.2% over the last twelve months by issuing new shares. Therefore, each share now receives a smaller portion of profit. Per share metrics like EPS help us understand how much actual shareholders are benefitting from the company's profits, while the net income level gives us a better view of the company's absolute size. Check out Idun Industrier's historical EPS growth by clicking on this link.

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

Unfortunately, Idun Industrier's profit is down 6.5% per year over three years. On the bright side, in the last twelve months it grew profit by 33%. But EPS was less impressive, up only 25% in that time. Therefore, the dilution is having a noteworthy influence on shareholder returns.

Changes in the share price do tend to reflect changes in earnings per share, in the long run. So Idun Industrier shareholders will want to see that EPS figure continue to increase. But on the other hand, we'd be far less excited to learn profit (but not EPS) was improving. For the ordinary retail shareholder, EPS is a great measure to check your hypothetical "share" of the company's profit.

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 Idun Industrier's Profit Performance

Idun Industrier shareholders should keep in mind how many new shares it is issuing, because, dilution clearly has the power to severely impact shareholder returns. Because of this, we think that it may be that Idun Industrier's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 25% EPS growth in the last year. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. So while earnings quality is important, it's equally important to consider the risks facing Idun Industrier at this point in time. Our analysis shows 2 warning signs for Idun Industrier (1 can't be ignored!) and we strongly recommend you look at these before investing.

Today we've zoomed in on a single data point to better understand the nature of Idun Industrier's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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. 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.

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

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.