Avino Silver & Gold Mines Ltd. (TSE:ASM) just reported strong earnings and the market reacted accordingly with a sharp rise in the share price. However, we believe shareholders may be missing some troubling details in the numbers.
Check out our latest analysis for Avino Silver & Gold Mines
To understand the value of a company’s earnings growth, it’s essential to account for any dilution to shareholders’ shares. In fact, Avino Silver & Gold Mines increased the number of shares outstanding by 11% over the last twelve months by issuing new shares. Therefore, each share now receives a smaller share of the profit. Per share metrics like earnings per share help us understand how much actual shareholders benefit from the company’s profits, while net income gives us a better sense of the company’s absolute size. View Avino Silver & Gold Mines’ historical earnings growth by clicking this link.
What impact does dilution have on Avino Silver & Gold Mines’ earnings per share (EPS)?
Avino Silver & Gold Mines made a loss three years ago. The good news is that profits have increased by 68% in the last twelve months. On the other hand, profits per share have only increased by 56% over the same period, so you can clearly see that dilution is affecting shareholder earnings.
Long-term returns per share Growth should lead to rising share prices, so Avino Silver & Gold Mines shareholders will want to see earnings per share continue to grow. On the other hand, we would be far less enthusiastic if we were told that earnings (but not earnings per share) were improving. For the average retail shareholder, earnings per share is a good yardstick to check their hypothetical “share” of the company’s profits.
You may be wondering what analysts are predicting in terms of future profitability. Fortunately, you can click here to see an interactive chart depicting future profitability based on their estimates.
Our assessment of Avino Silver & Gold Mines’ earnings performance
Due to dilution to existing shareholders, each Avino Silver & Gold Mines share now receives a significantly smaller share of total earnings. For this reason, we believe Avino Silver & Gold Mines’ statutory profits could be better than its underlying earnings power. The good news is that earnings per share grew 56% over the last year. Ultimately, it’s important to consider more than just the factors above if you want to properly understand the company. So if you want to dig deeper into this stock, it’s important to consider all the risks it faces. At Simply Wall St, we found 1 warning sign for Avino Silver & Gold Mines and we think they deserve your attention.
This note has only examined a single factor that can shed light on the nature of Avino Silver & Gold Mines’ earnings. But there is always more to discover if you are able to focus on the small details. For example, many people consider a high return on equity to indicate a favorable business situation, while others like to “follow the money” and look for stocks that insiders are buying. Although this may require a little research, you may find that free Collection of companies with high return on equity or this list of stocks with significant insider holdings may prove useful.
New: Manage all your stock portfolios in one place
We have the the ultimate portfolio companion for stock investors, and it’s free.
• Connect an unlimited number of portfolios and see your total amount in one currency
• Be notified of new warning signals or risks by email or mobile phone
• Track the fair value of your stocks
Try a demo portfolio for free
Do you have feedback on this article? Are you concerned about the content? Contact us directly from us. Alternatively, send an email to editorial-team (at) simplywallst.com.
This Simply Wall St article is of a general nature. We comment solely on the basis of historical data and analyst forecasts, using an unbiased methodology. Our articles do not constitute financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St does not hold any of the stocks mentioned.
