We Think That There Are More Issues For Spire (NYSE:SR) Than Just Sluggish Earnings

A lackluster earnings announcement from Spire Inc. (NYSE:SR) last week didn't sink the stock price. However, we believe that investors should be aware of some underlying factors which may be of concern.

Check out our latest analysis for Spire

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. Spire expanded the number of shares on issue by 9.8% 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 Spire's historical EPS growth by clicking on this link.

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

As you can see above, Spire has been growing its net income over the last few years, with an annualized gain of 48% over three years. Net income was down 10% over the last twelve months. But the EPS result was even worse, with the company recording a decline of 12%. So you can see that the dilution has had a bit of an impact on shareholders.

In the long term, if Spire's earnings per share can increase, then the share price should too. 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.

Our Take On Spire's Profit Performance

Over the last year Spire issued new shares and so, there's a noteworthy divergence between EPS and net income growth. Therefore, it seems possible to us that Spire's true underlying earnings power is actually less than its statutory profit. Nonetheless, it's still worth noting that its earnings per share have grown at 43% over the last three years. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, we've found that Spire has 3 warning signs (1 is significant!) that deserve your attention before going any further with your analysis.

This note has only looked at a single factor that sheds light on the nature of Spire's profit. But there are plenty of other ways to inform your opinion of a company. 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. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying to be useful.

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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.