We Think That There Are More Issues For Global Water Resources (NASDAQ:GWRS) Than Just Sluggish Earnings

Global Water Resources, Inc.'s (NASDAQ:GWRS) recent weak earnings report didn't cause a big stock movement. We think that investors are worried about some weaknesses underlying the earnings.

Our free stock report includes 2 warning signs investors should be aware of before investing in Global Water Resources. Read for free now.

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. Global Water Resources expanded the number of shares on issue by 14% over the last year. As a result, its net income is now split between 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. You can see a chart of Global Water Resources' EPS by clicking here.

How Is Dilution Impacting Global Water Resources' Earnings Per Share (EPS)?

As you can see above, Global Water Resources has been growing its net income over the last few years, with an annualized gain of 21% over three years. Net income was down 8.3% over the last twelve months. Unfortunately for shareholders, though, the earnings per share result was even worse, declining 8.8%. And so, you can see quite clearly that dilution is influencing shareholder earnings.

If Global Water Resources' 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 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.

Our Take On Global Water Resources' Profit Performance

Global Water Resources issued shares during the year, and that means its EPS performance lags its net income growth. Because of this, we think that it may be that Global Water Resources' statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 13% per annum growth in EPS for the last three. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For example - Global Water Resources has 2 warning signs we think you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Global Water Resources' profit. 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.