CapitaLand India Trust (SGX:CY6U) posted some decent earnings, but shareholders didn't react strongly. Our analysis has found some concerning factors which weaken the profit's foundation.

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. In fact, CapitaLand India Trust increased the number of shares on issue by 15% over the last twelve months by issuing new shares. 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 CapitaLand India Trust's EPS by clicking here.

A Look At The Impact Of CapitaLand India Trust's Dilution On Its Earnings Per Share (EPS)

As you can see above, CapitaLand India Trust has been growing its net income over the last few years, with an annualized gain of 13% over three years. And over the last 12 months, the company grew its profit by 7.3%. Meanwhile, EPS was flat over the same period. And so, you can see quite clearly that dilution is influencing shareholder earnings.

If CapitaLand India Trust'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.

How Do Unusual Items Influence Profit?

Finally, we should also consider the fact that unusual items boosted CapitaLand India Trust's net profit by S$141m 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. Which is hardly surprising, given the name. We can see that CapitaLand India Trust's positive unusual items were quite significant relative to its profit in the year 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 CapitaLand India Trust's Profit Performance

To sum it all up, CapitaLand India Trust got a nice boost to profit from unusual items; without that, its statutory results would have looked worse. 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. Considering all this we'd argue CapitaLand India Trust's profits probably give an overly generous impression of its sustainable level of profitability. If you'd like to know more about CapitaLand India Trust as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 4 warning signs for CapitaLand India Trust you should be mindful of and 1 of these makes us a bit uncomfortable.

In this article we've looked at a number of factors that can impair the utility of profit numbers, and we've come away cautious. 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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

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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.