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AngloGold Ashanti plc (NYSE:AU) announced strong profits, but the stock was stagnant. Our analysis suggests that shareholders have noticed something concerning in the numbers.
One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. AngloGold Ashanti expanded the number of shares on issue by 21% over the last year. Therefore, each share now receives a smaller portion of profit. To celebrate net income while ignoring dilution is like rejoicing because you have a single slice of a larger pizza, but ignoring the fact that the pizza is now cut into many more slices. Check out AngloGold Ashanti's historical EPS growth by clicking on this link.
A Look At The Impact Of AngloGold Ashanti's Dilution On Its Earnings Per Share (EPS)
We don't have any data on the company's profits from three years ago. Zooming in to the last year, we still can't talk about growth rates coherently, since it made a loss last year. What we do know is that while it's great to see a profit over the last twelve months, that profit would have been better, on a per share basis, if the company hadn't needed to issue shares. And so, you can see quite clearly that dilution is influencing shareholder earnings.
In the long term, if AngloGold Ashanti's earnings per share can increase, then the share price should too. However, if its profit increases while its earnings per share stay flat (or even fall) then shareholders might not see much benefit. 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 AngloGold Ashanti's Profit Performance
Over the last year AngloGold Ashanti issued new shares and so, there's a noteworthy divergence between EPS and net income growth. Therefore, it seems possible to us that AngloGold Ashanti's true underlying earnings power is actually less than its statutory profit. On the bright side, the company showed enough improvement to book a profit this year, after losing money last year. 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. If you'd like to know more about AngloGold Ashanti as a business, it's important to be aware of any risks it's facing. While conducting our analysis, we found that AngloGold Ashanti has 1 warning sign and it would be unwise to ignore this.