Despite posting some strong earnings, the market for Vivid Seats Inc.'s (NASDAQ:SEAT) stock hasn't moved much. Our analysis suggests that this might be because shareholders have noticed some concerning underlying factors.

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. Vivid Seats expanded the number of shares on issue by 6.0% 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. Check out Vivid Seats' historical EPS growth by clicking on this link.

How Is Dilution Impacting Vivid Seats' Earnings Per Share (EPS)?

Three years ago, Vivid Seats lost money. The good news is that profit was up 73% in the last twelve months. On the other hand, earnings per share are only up 29% over the same period. And so, you can see quite clearly that dilution is influencing shareholder earnings.

In the long term, earnings per share growth should beget share price growth. So Vivid Seats shareholders will want to see that EPS figure continue to increase. 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 Vivid Seats' Profit Performance

Each Vivid Seats share now gets a meaningfully smaller slice of its overall profit, due to dilution of existing shareholders. Therefore, it seems possible to us that Vivid Seats' true underlying earnings power is actually less than its statutory profit. The good news is that, its earnings per share increased by 29% in the last year. 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 while earnings quality is important, it's equally important to consider the risks facing Vivid Seats at this point in time. At Simply Wall St, we found 1 warning sign for Vivid Seats and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of Vivid Seats' 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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

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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.