China Merchants Expressway Network & Technology Holdings Co.,Ltd.'s (SZSE:001965) healthy profit numbers didn't contain any surprises for investors. We think this is due to investors looking beyond the statutory profits and being concerned with what they see.

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. China Merchants Expressway Network & Technology HoldingsLtd expanded the number of shares on issue by 9.9% over the last year. That means its earnings are split among a greater number of shares. 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 China Merchants Expressway Network & Technology HoldingsLtd's historical EPS growth by clicking on this link.

A Look At The Impact Of China Merchants Expressway Network & Technology HoldingsLtd's Dilution On Its Earnings Per Share (EPS)

China Merchants Expressway Network & Technology HoldingsLtd has improved its profit over the last three years, with an annualized gain of 31% in that time. And over the last 12 months, the company grew its profit by 18%. But in comparison, EPS only increased by 9.8% over the same period. And so, you can see quite clearly that dilution is influencing shareholder earnings.

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 China Merchants Expressway Network & Technology HoldingsLtd 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.

Our Take On China Merchants Expressway Network & Technology HoldingsLtd's Profit Performance

China Merchants Expressway Network & Technology HoldingsLtd shareholders should keep in mind how many new shares it is issuing, because, dilution clearly has the power to severely impact shareholder returns. Because of this, we think that it may be that China Merchants Expressway Network & Technology HoldingsLtd's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 24% per annum growth in EPS for the last three. 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. If you'd like to know more about China Merchants Expressway Network & Technology HoldingsLtd as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 3 warning signs for China Merchants Expressway Network & Technology HoldingsLtd (of which 1 is significant!) you should know about.

Today we've zoomed in on a single data point to better understand the nature of China Merchants Expressway Network & Technology HoldingsLtd's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. 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.