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

The market wasn't impressed with the soft earnings from Moment Group AB (STO:MOMENT) recently. We did some analysis, and found that there are some reasons to be cautious about the headline numbers.

Check out 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. 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 Moment Group's historical EPS growth by clicking on this link.

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

Three years ago, Moment Group lost money. And even focusing only on the last twelve months, we see profit is down 57%. Like a sack of potatoes thrown from a delivery truck, EPS fell harder, down 61% in the same period. 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 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.

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. Therefore, it seems possible to us that Moment Group'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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, Moment Group has 5 warning signs (and 1 which can't be ignored) we think you should know about.

This note has only looked at a single factor that sheds light on 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 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.