Investors were disappointed with Astrana Health, Inc.'s (NASDAQ:ASTH) earnings, despite the strong profit numbers. We did some digging and found some worrying underlying problems.

See our latest analysis for Astrana Health

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, Astrana Health issued 10% more new shares over the last year. That means its earnings are split among a greater number of shares. To celebrate net income while ignoring dilution is like rejoicing because you have a single slice of a larger pizza, but ignoring the fact that the pizza is now cut into many more slices. You can see a chart of Astrana Health's EPS by clicking here.

A Look At The Impact Of Astrana Health's Dilution On Its Earnings Per Share (EPS)

Unfortunately, Astrana Health's profit is down 11% per year over three years. On the bright side, in the last twelve months it grew profit by 40%. But EPS was less impressive, up only 37% in that time. So you can see that the dilution has had a bit of an impact on shareholders.

Changes in the share price do tend to reflect changes in earnings per share, in the long run. So it will certainly be a positive for shareholders if Astrana Health can grow EPS persistently. 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.

Our Take On Astrana Health's Profit Performance

Each Astrana Health share now gets a meaningfully smaller slice of its overall profit, due to dilution of existing shareholders. Therefore, it seems possible to us that Astrana Health's true underlying earnings power is actually less than its statutory profit. The good news is that, its earnings per share increased by 37% in the last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Case in point: We've spotted 1 warning sign for Astrana Health you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Astrana Health's profit. 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.

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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.