We Think That There Are Issues Underlying Logistri Fastighets' (NGM:LOGIST) Earnings

Logistri Fastighets AB (publ) (NGM:LOGIST) announced strong profits, but the stock was stagnant. Our analysis suggests that this might be because shareholders have noticed some concerning underlying factors.

Check out our latest analysis for Logistri Fastighets

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. Logistri Fastighets expanded the number of shares on issue by 50% over the last year. 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. You can see a chart of Logistri Fastighets' EPS by clicking here.

How Is Dilution Impacting Logistri Fastighets' Earnings Per Share (EPS)?

Logistri Fastighets' net profit dropped by 52% per year over the last three years. The good news is that profit was up 139% in the last twelve months. But EPS was less impressive, up only 109% in that time. Therefore, one can observe that the dilution is having a fairly profound effect on shareholder returns.

In the long term, earnings per share growth should beget share price growth. So Logistri Fastighets shareholders will want to see that EPS figure continue to increase. However, if its profit increases while its earnings per share stay flat (or even fall) then shareholders might not see much benefit. 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 Logistri Fastighets.

The Impact Of Unusual Items On Profit

On top of the dilution, we should also consider the kr57m impact of unusual items in the last year, which had the effect of suppressing profit. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. In the twelve months to March 2024, Logistri Fastighets had a big unusual items expense. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be.

Our Take On Logistri Fastighets' Profit Performance

To sum it all up, Logistri Fastighets took a hit from unusual items which pushed its profit down; without that, it would have made more money. But unfortunately the dilution means that shareholders now own a smaller proportion of the company (assuming they maintained the same number of shares). That will weigh on earnings per share, even if it is not reflected in net income. Based on these factors, it's hard to tell if Logistri Fastighets' profits are a reasonable reflection of its underlying profitability. If you want to do dive deeper into Logistri Fastighets, you'd also look into what risks it is currently facing. For instance, we've identified 6 warning signs for Logistri Fastighets (2 are significant) you should be familiar with.

Our examination of Logistri Fastighets has focussed on certain factors that can make its earnings look better than they are. 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.

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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.