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Enterprise Group, Inc. (TSE:E) announced strong profits, but the stock was stagnant. We did some digging, and we found some concerning factors in the details.
Check out our latest analysis for Enterprise Group
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, Enterprise Group issued 20% more new shares over the last year. That means its earnings are split among a greater number of shares. 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 Enterprise Group's historical EPS growth by clicking on this link.
A Look At The Impact Of Enterprise Group's Dilution On Its Earnings Per Share (EPS)
Three years ago, Enterprise Group lost money. On the bright side, in the last twelve months it grew profit by 135%. On the other hand, earnings per share are only up 127% over the same period. And so, you can see quite clearly that dilution is influencing shareholder earnings.
In the long term, earnings per share growth should beget share price growth. So Enterprise Group shareholders will want to see that EPS figure continue to increase. 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 Enterprise Group's Profit Performance
Each Enterprise Group share now gets a meaningfully smaller slice of its overall profit, due to dilution of existing shareholders. Therefore, it seems possible to us that Enterprise Group's true underlying earnings power is actually less than its statutory profit. But the happy news is that, while acknowledging we have to look beyond the statutory numbers, those numbers are still improving, with EPS growing at a very high rate over the last year. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. At Simply Wall St, we found 2 warning signs for Enterprise Group and we think they deserve your attention.