We Think You Should Be Aware Of Some Concerning Factors In Calviks' (STO:CALVIK) Earnings

The market shrugged off Calviks AB (publ)'s (STO:CALVIK) solid earnings report. Our analysis showed that there are some concerning factors in the earnings that investors may be cautious of.

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One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. As it happens, Calviks issued 9.7% more new shares 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 Calviks' historical EPS growth by clicking on this link.

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

Calviks has improved its profit over the last three years, with an annualized gain of 27% in that time. In contrast, earnings per share were actually down by 21% per year, in the exact same period. And over the last 12 months, the company grew its profit by 20%. But in comparison, EPS only increased by 5.3% 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 Calviks 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 Calviks' Profit Performance

Each Calviks share now gets a meaningfully smaller slice of its overall profit, due to dilution of existing shareholders. Because of this, we think that it may be that Calviks' statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 5.3% EPS growth in the last year. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. To help with this, we've discovered 4 warning signs (1 shouldn't be ignored!) that you ought to be aware of before buying any shares in Calviks.

This note has only looked at a single factor that sheds light on the nature of Calviks' profit. 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.