The market shrugged off Seanergy Maritime Holdings Corp.'s (NASDAQ:SHIP) weak earnings report. While shares were up, we believe there are some factors in the earnings report that might cause investors some concerns.

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. Seanergy Maritime Holdings expanded the number of shares on issue by 9.9% 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. Check out Seanergy Maritime Holdings' historical EPS growth by clicking on this link.

A Look At The Impact Of Seanergy Maritime Holdings' Dilution On Its Earnings Per Share (EPS)

Seanergy Maritime Holdings was losing money three years ago. Even looking at the last year, profit was still down 87%. Like a sack of potatoes thrown from a delivery truck, EPS fell harder, down 87% in the same period. So you can see that the dilution has had a bit of an impact on shareholders.

In the long term, if Seanergy Maritime Holdings' earnings per share can increase, then the share price should too. However, if its profit increases while its earnings per share stay flat (or even fall) then shareholders might not see much benefit. 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.

The Impact Of Unusual Items On Profit

Finally, we should also consider the fact that unusual items boosted Seanergy Maritime Holdings' net profit by US$7.6m over the last year. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. Which is hardly surprising, given the name. Seanergy Maritime Holdings had a rather significant contribution from unusual items relative to its profit to December 2023. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

Our Take On Seanergy Maritime Holdings' Profit Performance

In its last report Seanergy Maritime Holdings benefitted from unusual items which boosted its profit, which could make the profit seem better than it really is on a sustainable basis. And furthermore, it went and issued plenty of new shares, ensuring that each shareholder (who did not tip more money in) now owns a smaller proportion of the company. For the reasons mentioned above, we think that a perfunctory glance at Seanergy Maritime Holdings' statutory profits might make it look better than it really is on an underlying level. So while earnings quality is important, it's equally important to consider the risks facing Seanergy Maritime Holdings at this point in time. For example, we've found that Seanergy Maritime Holdings has 4 warning signs (1 is significant!) that deserve your attention before going any further with your analysis.

Our examination of Seanergy Maritime Holdings 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 are plenty of other ways to inform your opinion of a company. 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 that insiders are buying 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.