Earnings Troubles May Signal Larger Issues for Better Collective (STO:BETCO) Shareholders

The subdued market reaction suggests that Better Collective A/S' (STO:BETCO) recent earnings didn't contain any surprises. However, we believe that investors should be aware of some underlying factors which may be of concern.

Check out our latest analysis for Better Collective

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. In fact, Better Collective increased the number of shares on issue by 16% over the last twelve months by issuing new shares. Therefore, each share now receives a smaller portion of profit. 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. Check out Better Collective's historical EPS growth by clicking on this link.

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

Better Collective has improved its profit over the last three years, with an annualized gain of 22% in that time. In comparison, earnings per share only gained 2.6% over the same period. Net profit actually dropped by 50% in the last year. Unfortunately for shareholders, though, the earnings per share result was even worse, declining 53%. So you can see that the dilution has had a bit of an impact on shareholders.

In the long term, if Better Collective's earnings per share can increase, then the share price should too. 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 Better Collective's Profit Performance

Better Collective issued shares during the year, and that means its EPS performance lags its net income growth. Therefore, it seems possible to us that Better Collective's true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over the last twelve months. 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 Better Collective, you'd also look into what risks it is currently facing. When we did our research, we found 3 warning signs for Better Collective (1 is a bit concerning!) that we believe deserve your full attention.

This note has only looked at a single factor that sheds light on the nature of Better Collective's 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.