Impressive Earnings May Not Tell The Whole Story For Astrana Health (NASDAQ:ASTH)

Despite announcing strong earnings, Astrana Health, Inc.'s (NASDAQ:ASTH) stock was sluggish. We did some digging and found some worrying underlying problems.

Check out our latest analysis for Astrana Health

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. Astrana Health expanded the number of shares on issue by 10% over the last year. That means its earnings are split among 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. You can see a chart of Astrana Health's EPS by clicking here.

How Is Dilution Impacting Astrana Health's Earnings Per Share (EPS)?

Astrana Health's net profit dropped by 11% per year over the last three years. The good news is that profit was up 40% in the last twelve months. But EPS was less impressive, up only 37% in that time. And so, you can see quite clearly that dilution is influencing shareholder earnings.

Changes in the share price do tend to reflect changes in earnings per share, in the long run. So it will certainly be a positive for shareholders if Astrana Health can grow EPS persistently. 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 Astrana Health's Profit Performance

Astrana Health shareholders should keep in mind how many new shares it is issuing, because, dilution clearly has the power to severely impact shareholder returns. Because of this, we think that it may be that Astrana Health's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 37% EPS growth in the last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. If you'd like to know more about Astrana Health as a business, it's important to be aware of any risks it's facing. In terms of investment risks, we've identified 1 warning sign with Astrana Health, and understanding this should be part of your investment process.

This note has only looked at a single factor that sheds light on the nature of Astrana Health's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.