Following the release of a lackluster earnings report from Solaris Energy Infrastructure, Inc. (NYSE:SEI) the stock price made a strong positive move. We did some analysis and found some positive factors that investors might be paying attention to rather than profit.

See our latest analysis for Solaris Energy Infrastructure

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. In fact, Solaris Energy Infrastructure increased the number of shares on issue by 37% over the last twelve months by issuing new shares. As a result, its net income is now split between a greater number of shares. To talk about net income, without noticing earnings per share, is to be distracted by the big numbers while ignoring the smaller numbers that talk to per share value. You can see a chart of Solaris Energy Infrastructure's EPS by clicking here.

A Look At The Impact Of Solaris Energy Infrastructure's Dilution On Its Earnings Per Share (EPS)

Solaris Energy Infrastructure was losing money three years ago. And even focusing only on the last twelve months, we see profit is down 46%. Sadly, earnings per share fell further, down a full 42% in that time. Therefore, one can observe that the dilution is having a fairly profound effect on shareholder returns.

In the long term, if Solaris Energy Infrastructure's 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.

The Impact Of Unusual Items On Profit

On top of the dilution, we should also consider the US$3.8m impact of unusual items in the last year, which had the effect of suppressing profit. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Solaris Energy Infrastructure to produce a higher profit next year, all else being equal.

Our Take On Solaris Energy Infrastructure's Profit Performance

To sum it all up, Solaris Energy Infrastructure took a hit from unusual items which pushed its profit down; without that, it would have made more money. But on the other hand, the company issued more shares, so without buying more shares each shareholder will end up with a smaller part of the profit. Having considered these factors, we don't think Solaris Energy Infrastructure's statutory profits give an overly harsh view of the business. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. To that end, you should learn about the 5 warning signs we've spotted with Solaris Energy Infrastructure (including 1 which shouldn't be ignored).

Our examination of Solaris Energy Infrastructure has focussed on certain factors that can make its earnings look better than they are. 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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.