An increasing revenue is the sign of a good company. It denotes that the demand for the company’s products or services has increased. Vice versa, a decreasing or stagnant revenue is a bad sign.
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Net Profit vs EPS Graph
Along with the revenue, the profit of the company should also grow because it is the profit that matters at the end of the day. A company whose profit is stagnant or decreasing should be avoided.
EPS is closely related to Net Profit as it is equal to Net Profit/Number of Shares. Ideally both should follow the same growth pattern, unless the company has diluted its equity by issuing more shares. See Equity Dilution section on this page for further information.
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Dividend vs DPS Graph
A growing dividend is a very good sign in many ways. It means that the company has shared its growing profit with its share holders, which confirms the high integrity of management. It also confirms that the investment would yield a good dividend in coming days. Sometimes a company may need cash to invest in future investments to fuel further growth, so it may not be able to distribute a high percentage of dividend.
As in case of EPS, Dividend Per Share would closely follow the growth in Dividend provided that the Company has not diluted its equity by issuing more shares.
Equity Dilution Graph
It is one of the important factors to be kept in mind while investing. A company may be earning huge profits and may be distributing a high dividend, however if it keeps issuing more shares, that would dilute your ownership of the company. So that would mean, though your company would make money but you won`t.
Please note that Splits or bonus shares don`t contribute towards equity dilution as in such cases, the shares of all the owners increase proportionally.
Note: Above figures have been normalised to negate the effect of splits and bonuses.
Growth Table ( TTM values are as per latest declared results : Jun 21 )
|1 Y||3 Y||5 Y||4 Y|
|Revenue Growth||133.06 %||0.45 %||0.00 %||-|
|Net Profit Growth||182.03 %||11.42 %||0.00 %||-|
|EPS Growth||182.02 %||11.42 %||0.00 %||-|
|Dividend Growth||1142.86 %||150.36 %||0.00 %||-|
|DPS Growth||1142.86 %||150.37 %||0.00 %||-|
In the above table, you can see the effect of equity dilution over EPS growth and DPS growth which otherwise should have been same as the growth in Profit and Dividend respectively.
A company which has been able to maintain a steady growth over a high period of time can be considered more reliable, than the one whose performance fluctuates.
Ideally growth in dividend should follow the growth in profit. If it is not, then that means that the company intends to invest in avenues for future growth or it just wants to keep some cash for the future. But you should be aware about the reasons, just to be sure.
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