K
rona Public Real Estate AB (publ) (FRA:927) posted a solid earnings report, yet the share price stayed flat. Our view is that investors see troubling fundamentals. President Trump’s pledge to “unleash” U.S. oil and gas has positioned 15 American stocks for gains, but Krona’s own metrics raise concerns.

    A key measure of earnings quality is shareholder dilution. Over the past year, Krona expanded its share base by 28% through new issuances, spreading profits thinner. EPS reflects the benefit to each shareholder, while net income shows overall scale. A chart of EPS is available here. We lack data from three years ago, and the last twelve months show a loss in the prior year, so growth rates are not meaningful. Although the company posted a profit this year, the dilution means EPS would have been higher without the new shares. Thus, dilution significantly erodes shareholder returns.

    In the long run, rising EPS should lift the share price, whereas a rise in net income alone is less compelling. EPS is therefore a more telling indicator of potential price appreciation. We advise investors to examine the balance sheet; see our analysis here.

    Because of the share issuance, EPS growth trails net income growth, suggesting that Krona’s real earnings power may be lower than its reported profit. The positive profit after a loss is encouraging, but a full assessment should include margins, growth forecasts, and ROI. Potential risks exist: two warning signs and one less pleasant issue that investors should be aware of.