Investors were disappointed with Astrana Health, Inc.'s (NASDAQ:ASTH) earnings, despite the strong profit numbers. We did some digging and found some worrying underlying problems.
One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. Astrana Health expanded the number of shares on issue by 10% 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 Astrana Health's EPS by clicking here.
How Is Dilution Impacting Astrana Health's Earnings Per Share (EPS)?
Astrana Health's net profit dropped by 11% per year over the last three years. The good news is that profit was up 40% in the last twelve months. But EPS was less impressive, up only 37% in that time. Therefore, the dilution is having a noteworthy influence on shareholder returns.
Changes in the share price do tend to reflect changes in earnings per share, in the long run. So Astrana Health 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 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 Astrana Health's Profit Performance
Astrana Health shareholders should keep in mind how many new shares it is issuing, because, dilution clearly has the power to severely impact shareholder returns. Therefore, it seems possible to us that Astrana Health's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 37% EPS growth in 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. If you want to do dive deeper into Astrana Health, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 1 warning sign for Astrana Health you should know about.
Today we've zoomed in on a single data point to better understand the nature of Astrana Health's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful.
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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.
