We Think That There Are Issues Underlying OneSpaWorld Holdings' (NASDAQ:OSW) Earnings

Last week's profit announcement from OneSpaWorld Holdings Limited (NASDAQ:OSW) was underwhelming for investors, despite headline numbers being robust. We did some digging and found some worrying underlying problems.

View our latest analysis for OneSpaWorld Holdings

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. As it happens, OneSpaWorld Holdings issued 5.6% more new shares over the last year. Therefore, each share now receives a smaller portion of profit. 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 OneSpaWorld Holdings' historical EPS growth by clicking on this link.

How Is Dilution Impacting OneSpaWorld Holdings' Earnings Per Share (EPS)?

Three years ago, OneSpaWorld Holdings lost money. And even focusing only on the last twelve months, we don't have a meaningful growth rate because it made a loss a year ago, too. What we do know is that while it's great to see a profit over the last twelve months, that profit would have been better, on a per share basis, if the company hadn't needed to issue shares. Therefore, the dilution is having a noteworthy influence on shareholder returns.

In the long term, if OneSpaWorld 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 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.

Our Take On OneSpaWorld Holdings' Profit Performance

Over the last year OneSpaWorld Holdings issued new shares and so, there's a noteworthy divergence between EPS and net income growth. Because of this, we think that it may be that OneSpaWorld Holdings' statutory profits are better than its underlying earnings power. The good news is that it earned a profit in the last twelve months, despite its previous loss. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. If you want to do dive deeper into OneSpaWorld Holdings, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 1 warning sign for OneSpaWorld Holdings and you'll want to know about this.

Today we've zoomed in on a single data point to better understand the nature of OneSpaWorld Holdings' profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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 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.