Star Bulk Carriers Corp.'s (NASDAQ:SBLK) recent weak earnings report didn't cause a big stock movement. We think that investors are worried about some weaknesses underlying the earnings.

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, Star Bulk Carriers issued 11% more new shares over the last year. Therefore, each share now receives a smaller portion of profit. 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 Star Bulk Carriers' EPS by clicking here.

How Is Dilution Impacting Star Bulk Carriers' Earnings Per Share (EPS)?

Star Bulk Carriers has improved its profit over the last three years, with an annualized gain of 375% in that time. Net profit actually dropped by 54% in the last year. Unfortunately for shareholders, though, the earnings per share result was even worse, declining 50%. And so, you can see quite clearly that dilution is influencing shareholder earnings.

In the long term, if Star Bulk Carriers' earnings per share can increase, then the share price should too. 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.

How Do Unusual Items Influence Profit?

Finally, we should also consider the fact that unusual items boosted Star Bulk Carriers' net profit by US$23m over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And, after all, that's exactly what the accounting terminology implies. If Star Bulk Carriers doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Our Take On Star Bulk Carriers' Profit Performance

To sum it all up, Star Bulk Carriers got a nice boost to profit from unusual items; without that, its statutory results would have looked worse. On top of that, the dilution means that its earnings per share performance is worse than its profit performance. For the reasons mentioned above, we think that a perfunctory glance at Star Bulk Carriers' statutory profits might make it look better than it really is on an underlying level. If you'd like to know more about Star Bulk Carriers as a business, it's important to be aware of any risks it's facing. While conducting our analysis, we found that Star Bulk Carriers has 4 warning signs and it would be unwise to ignore them.

Our examination of Star Bulk Carriers has focussed on certain factors that can make its earnings look better than they are. And, on that basis, we are somewhat skeptical. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. 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.