Gifore Agricultural Science & Technology Service Co.,Ltd's (SZSE:300022) robust recent earnings didn't do much to move the stock. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers.
One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. Gifore Agricultural Science & Technology ServiceLtd expanded the number of shares on issue by 31% over the last year. Therefore, each share now receives a smaller portion of profit. 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 Gifore Agricultural Science & Technology ServiceLtd's historical EPS growth by clicking on this link.
A Look At The Impact Of Gifore Agricultural Science & Technology ServiceLtd's Dilution On Its Earnings Per Share (EPS)
Three years ago, Gifore Agricultural Science & Technology ServiceLtd lost money. The good news is that profit was up 50% in the last twelve months. On the other hand, earnings per share are only up 27% over the same period. So you can see that the dilution has had a fairly significant impact on shareholders.
In the long term, earnings per share growth should beget share price growth. So Gifore Agricultural Science & Technology ServiceLtd shareholders will want to see that EPS figure continue to increase. 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 Gifore Agricultural Science & Technology ServiceLtd.
Our Take On Gifore Agricultural Science & Technology ServiceLtd's Profit Performance
Each Gifore Agricultural Science & Technology ServiceLtd share now gets a meaningfully smaller slice of its overall profit, due to dilution of existing shareholders. Therefore, it seems possible to us that Gifore Agricultural Science & Technology ServiceLtd's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 27% EPS growth 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Case in point: We've spotted 1 warning sign for Gifore Agricultural Science & Technology ServiceLtd you should be aware of.
Today we've zoomed in on a single data point to better understand the nature of Gifore Agricultural Science & Technology ServiceLtd'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 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.