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The subdued market reaction suggests that Emera Incorporated's (TSE:EMA) recent earnings didn't contain any surprises. However, we believe that investors should be aware of some underlying factors which may be of concern.
View our latest analysis for Emera
To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. Emera expanded the number of shares on issue by 6.7% over the last year. As a result, its net income is now split between 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. You can see a chart of Emera's EPS by clicking here.
A Look At The Impact Of Emera's Dilution On Its Earnings Per Share (EPS)
As you can see above, Emera has been growing its net income over the last few years, with an annualized gain of 37% over three years. In comparison, earnings per share only gained 23% over the same period. Net profit actually dropped by 46% in the last year. Unfortunately for shareholders, though, the earnings per share result was even worse, declining 49%. So you can see that the dilution has had a bit of an impact on shareholders.
If Emera's EPS can grow over time then that drastically improves the chances of the share price moving in the same direction. However, if its profit increases while its earnings per share stay flat (or even fall) then shareholders might not see much benefit. 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 Emera's Profit Performance
Over the last year Emera issued new shares and so, there's a noteworthy divergence between EPS and net income growth. Because of this, we think that it may be that Emera's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 23% per annum growth in EPS for the last three. 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. 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. For example, Emera has 4 warning signs (and 2 which are potentially serious) we think you should know about.