The Strong Earnings Posted By OptimizeRx (NASDAQ:OPRX) Are A Good Indication Of The Strength Of The Business

Even though OptimizeRx Corporation's (NASDAQ:OPRX) recent earnings release was robust, the market didn't seem to notice. Investors are probably missing some underlying factors which are encouraging for the future of the company.

Check out our latest analysis for OptimizeRx

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. OptimizeRx expanded the number of shares on issue by 18% over the last year. That means its earnings are split among a greater number of shares. Per share metrics like EPS help us understand how much actual shareholders are benefitting from the company's profits, while the net income level gives us a better view of the company's absolute size. Check out OptimizeRx's historical EPS growth by clicking on this link.

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

We don't have any data on the company's profits from three years ago. 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. But mathematics aside, it is always good to see when a formerly unprofitable business come good (though we accept profit would have been higher if dilution had not been required). And so, you can see quite clearly that dilution is influencing shareholder earnings.

If OptimizeRx's EPS can grow over time then that drastically improves the chances of the share price moving in the same direction. 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.

The Impact Of Unusual Items On Profit

Alongside that dilution, it's also important to note that OptimizeRx's profit suffered from unusual items, which reduced profit by US$1.2m 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. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. OptimizeRx took a rather significant hit from unusual items in the year to September 2021. As a result, we can surmise that the unusual items made its statutory profit significantly weaker than it would otherwise be.

Our Take On OptimizeRx's Profit Performance

OptimizeRx 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. Based on these factors, we think that OptimizeRx's profits are a reasonably conservative guide to its underlying profitability. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. In terms of investment risks, we've identified 3 warning signs with OptimizeRx, and understanding these should be part of your investment process.

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 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 that insiders are buying.

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.

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