Cadre Holdings' (NYSE:CDRE) Soft Earnings Don't Show The Whole Picture

Soft earnings didn't appear to concern Cadre Holdings, Inc.'s (NYSE:CDRE) shareholders over the last week. We did some digging, and we believe the earnings are stronger than they seem.

Check out our latest analysis for Cadre Holdings

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. As it happens, Cadre Holdings issued 8.0% more new shares over the last year. That means its earnings are split among 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. You can see a chart of Cadre Holdings' EPS by clicking here.

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

As you can see above, Cadre Holdings has been growing its net income over the last few years, with an annualized gain of 36% over three years. But on the other hand, earnings per share actually fell by 4.9% per year. Net profit actually dropped by 8.1% in the last year. But the EPS result was even worse, with the company recording a decline of 12%. So you can see that the dilution has had a bit of an impact on shareholders.

In the long term, if Cadre Holdings' earnings per share can increase, then the share price should too. 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.

The Impact Of Unusual Items On Profit

Alongside that dilution, it's also important to note that Cadre Holdings' profit suffered from unusual items, which reduced profit by US$11m in the last twelve months. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And, after all, that's exactly what the accounting terminology implies. Assuming those unusual expenses don't come up again, we'd therefore expect Cadre Holdings to produce a higher profit next year, all else being equal.

Our Take On Cadre Holdings' Profit Performance

To sum it all up, Cadre Holdings 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. Given the contrasting considerations, we don't have a strong view as to whether Cadre Holdings's profits are an apt reflection of its underlying potential for profit. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example - Cadre Holdings has 3 warning signs we think you should be aware of.

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