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Sienna Senior Living Inc. (TSE:SIA) announced strong profits, but the stock was stagnant. We did some digging, and we found some concerning factors in the details.
View our latest analysis for Sienna Senior Living
To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. As it happens, Sienna Senior Living issued 13% more new shares over the last year. That means its earnings are split among a greater number of shares. Per share metrics like EPS help us understand how much actual shareholders are benefitting from the company's profits, while the net income level gives us a better view of the company's absolute size. Check out Sienna Senior Living's historical EPS growth by clicking on this link.
How Is Dilution Impacting Sienna Senior Living's Earnings Per Share (EPS)?
As you can see above, Sienna Senior Living has been growing its net income over the last few years, with an annualized gain of 86% over three years. But EPS was only up 63% per year, in the exact same period. And at a glance the 446% gain in profit over the last year impresses. On the other hand, earnings per share are only up 422% in that time. And so, you can see quite clearly that dilution is influencing shareholder earnings.
Changes in the share price do tend to reflect changes in earnings per share, in the long run. So Sienna Senior Living 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 Sienna Senior Living's Profit Performance
Sienna Senior Living shareholders should keep in mind how many new shares it is issuing, because, dilution clearly has the power to severely impact shareholder returns. Because of this, we think that it may be that Sienna Senior Living's statutory profits are better than its underlying earnings power. 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. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Case in point: We've spotted 2 warning signs for Sienna Senior Living you should be aware of.