Investors were disappointed with Verve Group SE's (ETR:M8G) recent earnings release. We did some digging and found some underlying numbers that are worrying.
View our latest analysis for Verve Group
To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. As it happens, Verve Group issued 17% more new shares over the last year. As a result, its net income is now split between 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. You can see a chart of Verve Group's EPS by clicking here.
As you can see above, Verve Group has been growing its net income over the last few years, with an annualized gain of 81% over three years. But EPS was only up 36% per year, in the exact same period. And at a glance the 52% gain in profit over the last year impresses. On the other hand, earnings per share are only up 36% in that time. So you can see that the dilution has had a bit of an impact on shareholders.
Changes in the share price do tend to reflect changes in earnings per share, in the long run. So it will certainly be a positive for shareholders if Verve Group can grow EPS persistently. 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.
Finally, we should also consider the fact that unusual items boosted Verve Group's net profit by €68m over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And, after all, that's exactly what the accounting terminology implies. We can see that Verve Group's positive unusual items were quite significant relative to its profit in the year to September 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.