Sichuan Chuantou Energy Co.Ltd's (SHSE:600674) robust recent earnings didn't do much to move the stock. We think this is due to investors looking beyond the statutory profits and being concerned with what they see.

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. Sichuan Chuantou EnergyLtd expanded the number of shares on issue by 9.3% over the last year. As a result, its net income is now split between 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 Sichuan Chuantou EnergyLtd's EPS by clicking here.

How Is Dilution Impacting Sichuan Chuantou EnergyLtd's Earnings Per Share (EPS)?

As you can see above, Sichuan Chuantou EnergyLtd has been growing its net income over the last few years, with an annualized gain of 54% over three years. And in the last year the company managed to bump profit up by 12%. But that's starkly different from the 32% drop in earnings per share. So you can see that the dilution has had a bit of an impact on shareholders.

In the long term, if Sichuan Chuantou EnergyLtd's earnings per share can increase, then the share price should too. 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 Sichuan Chuantou EnergyLtd's Profit Performance

Each Sichuan Chuantou EnergyLtd share now gets a meaningfully smaller slice of its overall profit, due to dilution of existing shareholders. Because of this, we think that it may be that Sichuan Chuantou EnergyLtd's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 47% 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. If you'd like to know more about Sichuan Chuantou EnergyLtd as a business, it's important to be aware of any risks it's facing. For example, we've discovered 2 warning signs that you should run your eye over to get a better picture of Sichuan Chuantou EnergyLtd.

Today we've zoomed in on a single data point to better understand the nature of Sichuan Chuantou EnergyLtd'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.