Why Swedish Logistic Property's (STO:SLP B) Soft Earnings Are Just The Beginning Of Its Problems

Swedish Logistic Property AB's (STO:SLP B) stock wasn't much affected by its recent lackluster earnings numbers. We did some digging, and we believe that investors are missing some worrying factors underlying the profit figures.

View our latest analysis for Swedish Logistic Property

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. As it happens, Swedish Logistic Property issued 25% more new shares over the last year. As a result, its net income is now split between a greater number of shares. 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 Swedish Logistic Property's historical EPS growth by clicking on this link.

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

Swedish Logistic Property's net profit dropped by 26% per year over the last three years. Even looking at the last year, profit was still down 26%. Like a sack of potatoes thrown from a delivery truck, EPS fell harder, down 36% in the same period. So you can see that the dilution has had a fairly significant impact on shareholders.

If Swedish Logistic Property'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.

How Do Unusual Items Influence Profit?

Alongside that dilution, it's also important to note that Swedish Logistic Property's profit was boosted by unusual items worth kr236m in the last twelve months. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And that's as you'd expect, given these boosts are described as 'unusual'. We can see that Swedish Logistic Property's positive unusual items were quite significant relative to its profit in the year to December 2023. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

Our Take On Swedish Logistic Property's Profit Performance

To sum it all up, Swedish Logistic Property got a nice boost to profit from unusual items; without that, its statutory results would have looked worse. And furthermore, it went and issued plenty of new shares, ensuring that each shareholder (who did not tip more money in) now owns a smaller proportion of the company. Considering all this we'd argue Swedish Logistic Property's profits probably give an overly generous impression of its sustainable level of profitability. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. When we did our research, we found 4 warning signs for Swedish Logistic Property (1 is potentially serious!) that we believe deserve your full attention.

In this article we've looked at a number of factors that can impair the utility of profit numbers, and we've come away cautious. 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.