Huludao Zinc Industry Co.,Ltd.'s (SZSE:000751) recent weak earnings report didn't cause a big stock movement. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. Huludao Zinc IndustryLtd expanded the number of shares on issue by 15% over the last year. Therefore, each share now receives a smaller portion of profit. Per share metrics like EPS help us understand how much actual shareholders are benefitting from the company's profits, while the net income level gives us a better view of the company's absolute size. You can see a chart of Huludao Zinc IndustryLtd's EPS by clicking here.

How Is Dilution Impacting Huludao Zinc IndustryLtd's Earnings Per Share (EPS)?

Unfortunately, Huludao Zinc IndustryLtd's profit is down 79% per year over three years. And even focusing only on the last twelve months, we see profit is down 5.7%. Like a sack of potatoes thrown from a delivery truck, EPS fell harder, down 31% in the same period. And so, you can see quite clearly that dilution is influencing shareholder earnings.

If Huludao Zinc IndustryLtd's EPS can grow over time then that drastically improves the chances of the share price moving in the same direction. 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.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Huludao Zinc IndustryLtd.

Our Take On Huludao Zinc IndustryLtd's Profit Performance

Huludao Zinc IndustryLtd issued shares during the year, and that means its EPS performance lags its net income growth. Therefore, it seems possible to us that Huludao Zinc IndustryLtd's true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over the last twelve months. 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 Huludao Zinc IndustryLtd as a business, it's important to be aware of any risks it's facing. For instance, we've identified 3 warning signs for Huludao Zinc IndustryLtd (1 shouldn't be ignored) you should be familiar with.

This note has only looked at a single factor that sheds light on the nature of Huludao Zinc IndustryLtd's 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. 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.