NanJing Research Institute of Surveying, Mapping & Geotechnical Investigation, Co.Ltd's (SZSE:300826) stock showed strength, with investors undeterred by its weak earnings report. We think that shareholders might be missing some concerning factors that our analysis found.

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. As it happens, NanJing Research Institute of Surveying Mapping & Geotechnical InvestigationLtd issued 7.0% more new shares 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 NanJing Research Institute of Surveying Mapping & Geotechnical InvestigationLtd's historical EPS growth by clicking on this link.

How Is Dilution Impacting NanJing Research Institute of Surveying Mapping & Geotechnical InvestigationLtd's Earnings Per Share (EPS)?

Unfortunately, NanJing Research Institute of Surveying Mapping & Geotechnical InvestigationLtd's profit is down 43% per year over three years. Even looking at the last year, profit was still down 28%. Sadly, earnings per share fell further, down a full 27% in that time. And so, you can see quite clearly that dilution is influencing shareholder earnings.

If NanJing Research Institute of Surveying Mapping & Geotechnical InvestigationLtd'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 NanJing Research Institute of Surveying Mapping & Geotechnical InvestigationLtd.

Our Take On NanJing Research Institute of Surveying Mapping & Geotechnical InvestigationLtd's Profit Performance

NanJing Research Institute of Surveying Mapping & Geotechnical InvestigationLtd issued shares during the year, and that means its EPS performance lags its net income growth. Because of this, we think that it may be that NanJing Research Institute of Surveying Mapping & Geotechnical InvestigationLtd's statutory profits are better than its underlying earnings power. In further bad news, its earnings per share decreased 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. When we did our research, we found 4 warning signs for NanJing Research Institute of Surveying Mapping & Geotechnical InvestigationLtd (2 are significant!) that we believe deserve your full attention.

Today we've zoomed in on a single data point to better understand the nature of NanJing Research Institute of Surveying Mapping & Geotechnical InvestigationLtd's 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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.