Impressive Earnings May Not Tell The Whole Story For RBC Bearings (NYSE:RBC) - Simply Wall St News

RBC Bearings Incorporated's (NYSE:RBC) robust earnings report didn't manage to move the market for its stock. Our analysis suggests that shareholders have noticed something concerning in the numbers.

View our latest analysis for RBC Bearings

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. In fact, RBC Bearings increased the number of shares on issue by 8.2% over the last twelve months by issuing new shares. Therefore, each share now receives a smaller portion of profit. 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 RBC Bearings' historical EPS growth by clicking on this link.

As you can see above, RBC Bearings has been growing its net income over the last few years, with an annualized gain of 186% over three years. In comparison, earnings per share only gained 147% over the same period. And at a glance the 22% gain in profit over the last year impresses. But in comparison, EPS only increased by 22% over the same period. So you can see that the dilution has had a bit of an impact on shareholders.

In the long term, earnings per share growth should beget share price growth. So it will certainly be a positive for shareholders if RBC Bearings can grow EPS persistently. 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.

Each RBC Bearings share now gets a meaningfully smaller slice of its overall profit, due to dilution of existing shareholders. Therefore, it seems possible to us that RBC Bearings' true underlying earnings power is actually less than its statutory profit. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example - RBC Bearings has 1 warning sign we think you should be aware of.

This note has only looked at a single factor that sheds light on the nature of RBC Bearings' profit. 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. 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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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.

Manufactures and markets engineered precision bearings, components, and systems in the United States and internationally.

Solid track record with adequate balance sheet.