We Think That There Are More Issues For TradeDoubler (STO:TRAD) Than Just Sluggish Earnings

TradeDoubler AB (publ)'s (STO:TRAD) stock showed strength, with investors undeterred by its weak earnings report. Sometimes, shareholders are willing to ignore soft numbers with the hope that they will improve, but our analysis suggests this is unlikely for TradeDoubler.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. TradeDoubler expanded the number of shares on issue by 34% over the last year. As a result, its net income is now split between 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. Check out TradeDoubler's historical EPS growth by clicking on this link.

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

TradeDoubler's net profit dropped by 51% per year over the last three years. And even focusing only on the last twelve months, we see profit is down 51%. Sadly, earnings per share fell further, down a full 61% in that time. And so, you can see quite clearly that dilution is having a rather significant impact on shareholders.

If TradeDoubler's EPS can grow over time then that drastically improves the chances of the share price moving in the same direction. However, if its profit increases while its earnings per share stay flat (or even fall) then shareholders might not see much benefit. 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 TradeDoubler's Profit Performance

Over the last year TradeDoubler issued new shares and so, there's a noteworthy divergence between EPS and net income growth. As a result, we think it may well be the case that TradeDoubler's underlying earnings power is lower than its statutory profit. In further bad news, its earnings per share decreased in the last year. 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'd like to know more about TradeDoubler as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 3 warning signs for TradeDoubler you should be mindful of and 1 of them makes us a bit uncomfortable.

This note has only looked at a single factor that sheds light on the nature of TradeDoubler's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. 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.

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.