Zhengzhou Qianweiyangchu Food Co., Ltd.'s (SZSE:001215) robust earnings report didn't manage to move the market for its stock. Our analysis suggests that shareholders have noticed something concerning in the numbers.

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. As it happens, Zhengzhou Qianweiyangchu Food issued 15% more new shares 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. You can see a chart of Zhengzhou Qianweiyangchu Food's EPS by clicking here.

How Is Dilution Impacting Zhengzhou Qianweiyangchu Food's Earnings Per Share (EPS)?

Zhengzhou Qianweiyangchu Food has improved its profit over the last three years, with an annualized gain of 64% in that time. In comparison, earnings per share only gained 15% over the same period. And the 34% profit boost in the last year certainly seems impressive at first glance. But in comparison, EPS only increased by 27% over the same period. So you can see that the dilution has had a bit of an impact on shareholders.

In the long term, earnings per share growth should beget share price growth. So Zhengzhou Qianweiyangchu Food 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 Zhengzhou Qianweiyangchu Food's Profit Performance

Each Zhengzhou Qianweiyangchu Food share now gets a meaningfully smaller slice of its overall profit, due to dilution of existing shareholders. Therefore, it seems possible to us that Zhengzhou Qianweiyangchu Food's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 15% per annum growth in EPS for the last three. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. At Simply Wall St, we found 1 warning sign for Zhengzhou Qianweiyangchu Food and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of Zhengzhou Qianweiyangchu Food's profit. But there are plenty of other ways to inform your opinion of a company. 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 that insiders are buying 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.