We Think That There Are More Issues For Moment Group (STO:MOMENT) Than Just Sluggish Earnings

A lackluster earnings announcement from Moment Group AB (STO:MOMENT) last week didn't sink the stock price. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

See our latest analysis for Moment Group

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. As it happens, Moment Group issued 12% more new shares over the last year. That means its earnings are split among a greater number of shares. 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. You can see a chart of Moment Group's EPS by clicking here.

How Is Dilution Impacting Moment Group's Earnings Per Share (EPS)?

Moment Group was losing money three years ago. And even focusing only on the last twelve months, we see profit is down 50%. Sadly, earnings per share fell further, down a full 50% in that time. So you can see that the dilution has had a bit of an impact on shareholders.

If Moment Group's 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 the ordinary retail shareholder, EPS is a great measure to check your hypothetical "share" of the company's profit.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Moment Group.

Our Take On Moment Group's Profit Performance

Moment Group 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 Moment Group's statutory profits are better than its underlying earnings power. Sadly, its EPS was down over the last twelve months. 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 Moment Group at this point in time. In terms of investment risks, we've identified 3 warning signs with Moment Group, and understanding these should be part of your investment process.

Today we've zoomed in on a single data point to better understand the nature of Moment Group'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. 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. 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.