There May Be Some Bright Spots In CBIZ's (NYSE:CBZ) Earnings

The most recent earnings report from CBIZ, Inc. (NYSE:CBZ) was disappointing for shareholders. Despite the soft profit numbers, our analysis has optimistic about the overall quality of the income statement.

Check out our latest analysis for CBIZ

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. CBIZ expanded the number of shares on issue by 6.1% 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 CBIZ's historical EPS growth by clicking on this link.

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

CBIZ's net profit dropped by 42% per year over the last three years. Even looking at the last year, profit was still down 66%. Like a sack of potatoes thrown from a delivery truck, EPS fell harder, down 68% in the same period. So you can see that the dilution has had a bit of an impact on shareholders.

If CBIZ's EPS can grow over time then that drastically improves the chances of the share price moving in the same direction. But on the other hand, we'd be far less excited to learn profit (but not EPS) was improving. 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.

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 CBIZ's profit suffered from unusual items, which reduced profit by US$51m in the last twelve months. 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 December 2024, CBIZ 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 CBIZ's Profit Performance

CBIZ suffered from unusual items which depressed its profit in its last report; if that is not repeated then profit should be higher, all else being equal. But on the other hand, the company issued more shares, so without buying more shares each shareholder will end up with a smaller part of the profit. Considering all the aforementioned, we'd venture that CBIZ's profit result is a pretty good guide to its true profitability, albeit a bit on the conservative side. If you'd like to know more about CBIZ as a business, it's important to be aware of any risks it's facing. To that end, you should learn about the 4 warning signs we've spotted with CBIZ (including 1 which is significant).

In this article we've looked at a number of factors that can impair the utility of profit numbers, as a guide to a business. 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 with high insider ownership.

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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.