Despite Smurfit Westrock Plc's (NYSE:SW) most recent earnings report having soft headline numbers, its stock has had a positive performance. We did some analysis and found some positive factors that investors might be paying attention to rather than profit.

Check out our latest analysis for Smurfit Westrock

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. As it happens, Smurfit Westrock issued 100% more new shares over the last year. That means its earnings are split among 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. Check out Smurfit Westrock's historical EPS growth by clicking on this link.

How Is Dilution Impacting Smurfit Westrock's Earnings Per Share (EPS)?

Smurfit Westrock's net profit dropped by 70% per year over the last three years. And even focusing only on the last twelve months, we see profit is down 78%. Sadly, earnings per share fell further, down a full 82% in that time. So you can see that the dilution has had a fairly significant impact on shareholders.

In the long term, if Smurfit Westrock'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 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

Alongside that dilution, it's also important to note that Smurfit Westrock's profit suffered from unusual items, which reduced profit by US$468m in the last twelve months. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. 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. Smurfit Westrock took a rather significant hit from unusual items in the year to September 2024. All else being equal, this would likely have the effect of making the statutory profit look worse than its underlying earnings power.

Our Take On Smurfit Westrock's Profit Performance

Smurfit Westrock suffered from unusual items which depressed its profit in its last report; if that is not repeated then profit should be higher, all else being equal. 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 Smurfit Westrock's statutory profits give an overly harsh view of the business. If you'd like to know more about Smurfit Westrock as a business, it's important to be aware of any risks it's facing. When we did our research, we found 5 warning signs for Smurfit Westrock (3 shouldn't be ignored!) that we believe deserve your full attention.

Our examination of Smurfit Westrock has focussed on certain factors that can make its earnings look better than they are. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.