Robust Earnings May Not Tell The Whole Story For TCECUR Sweden (NGM:TCC A)

TCECUR Sweden AB (publ) (NGM:TCC A) just reported some strong earnings, and the market reacted accordingly with a healthy uplift in the share price. We did some analysis and think that investors are missing some details hidden beneath the profit numbers.

View our latest analysis for TCECUR Sweden

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. In fact, TCECUR Sweden increased the number of shares on issue by 6.1% over the last twelve months by issuing new shares. 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 TCECUR Sweden's historical EPS growth by clicking on this link.

How Is Dilution Impacting TCECUR Sweden's Earnings Per Share (EPS)?

TCECUR Sweden was losing money three years ago. The good news is that profit was up 158% in the last twelve months. But EPS was less impressive, up only 81% in that time. Therefore, the dilution is having a noteworthy influence on shareholder returns.

Changes in the share price do tend to reflect changes in earnings per share, in the long run. So TCECUR Sweden shareholders will want to see that EPS figure continue to increase. 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 TCECUR Sweden.

Our Take On TCECUR Sweden's Profit Performance

Each TCECUR Sweden share now gets a meaningfully smaller slice of its overall profit, due to dilution of existing shareholders. Because of this, we think that it may be that TCECUR Sweden's statutory profits are better than its underlying earnings power. The silver lining is that its EPS growth over the last year has been really wonderful, even if it's not a perfect measure. 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 TCECUR Sweden at this point in time. For example - TCECUR Sweden has 3 warning signs we think you should be aware of.

This note has only looked at a single factor that sheds light on the nature of TCECUR Sweden's profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. 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.