Share Dilution

Strong VibroPower (SGX: BJD) Earnings Have Weak Fundamentals


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Despite strong earnings, the market for VibroPower Corporation Limited (SGX: BJD) the stock hasn’t moved much. We did some research and found some factors of concern in the details.

Check out our latest review for VibroPower

SGX Revenue and Revenue History: BJD Aug 23, 2021

In order to understand the potential for return per share, it is essential to consider the extent to which a company dilutes its shareholders. As it turns out, VibroPower has issued 37% more new shares in the past year. This means that its profits are distributed among a greater number of stocks. Celebrating the bottom line while ignoring the dilution is like celebrating because you only have one slice of a larger pizza, but ignoring the fact that the pizza is now cut into many more slices. You can see a graph of VibroPower’s EPS by clicking here.

A look at the impact of VibroPower’s dilution on earnings per share (EPS).

Unfortunately, we have no visibility on its profits three years ago because we lack data. Zooming in on last year, we still can’t talk about growth rate consistently, since it made a loss last year. But math aside, it’s always good to see when a once unprofitable business comes to fruition (although we accept that the profit would have been higher if dilution hadn’t been necessary). And so, you can see quite clearly that dilution has a pretty big impact on shareholders.

While VibroPower’s BPA can increase over time, it dramatically improves the chances of the stock price moving in the same direction. But on the other hand, we’d be a lot less excited to hear that earnings (but not EPS) were improving. For this reason, one could argue that EPS is more important than long-term net profit, assuming the goal is to assess whether a company’s stock price might rise.

To note: we always recommend that investors check the strength of the balance sheet. Click here to access our analysis of VibroPower’s balance sheet.

Our take on VibroPower’s profit performance

Over the past year, VibroPower has issued new shares and as a result there is a noticeable divergence between EPS and net profit growth. For this reason, we believe that VibroPower’s statutory earnings may be a poor indicator of its underlying earnings power and could give investors an overly positive impression of the company. The good news is that she has made a profit in the past twelve months, despite her previous loss. Of course, we’ve only scratched the surface when it comes to analyzing his income; one could also consider margins, forecast growth and return on investment, among other factors. So, if you want to delve deeper into this title, it is crucial to consider the risks it faces. For example, we have identified 2 warning signs for VibroPower (1 is of concern) that you should know about.

This memo has considered only one factor that sheds light on the nature of VibroPower’s profit. But there are plenty of other ways to tell your opinion about a business. For example, many people see a high return on equity as an indication of a favorable business economy, while others like to “follow the money” and look for stocks that insiders are buying. Although it may take a bit of research on your behalf, you can find this free set of companies offering a high return on equity, or that list of stocks that insiders buy to be useful.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.
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