The subdued market reaction suggests that DEUTZ Aktiengesellschaft's (ETR:DEZ) recent earnings didn't contain any surprises. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

See our latest analysis for DEUTZ

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. As it happens, DEUTZ issued 15% more new shares over the last year. That means its earnings are split among a greater number of shares. 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 DEUTZ's historical EPS growth by clicking on this link.

A Look At The Impact Of DEUTZ's Dilution On Its Earnings Per Share (EPS)

DEUTZ was losing money three years ago. Even looking at the last year, profit was still down 35%. Like a sack of potatoes thrown from a delivery truck, EPS fell harder, down 38% in the same period. So you can see that the dilution has had a bit of an impact on shareholders.

If DEUTZ's 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 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 DEUTZ's Profit Performance

DEUTZ issued shares during the year, and that means its EPS performance lags its net income growth. Therefore, it seems possible to us that DEUTZ's true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over the last twelve months. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example - DEUTZ has 4 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 DEUTZ's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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. 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.