A lackluster earnings announcement from Epoxy Base Electronic Material Corporation Limited (SHSE:603002) last week didn't sink the stock price. However, we believe that investors should be aware of some underlying factors which may be of concern.
In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. In fact, Epoxy Base Electronic Material increased the number of shares on issue by 25% over the last twelve months by issuing new shares. 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 Epoxy Base Electronic Material's EPS by clicking here.
A Look At The Impact Of Epoxy Base Electronic Material's Dilution On Its Earnings Per Share (EPS)
Unfortunately, Epoxy Base Electronic Material's profit is down 71% per year over three years. Even looking at the last year, profit was still down 85%. Like a sack of potatoes thrown from a delivery truck, EPS fell harder, down 87% in the same period. And so, you can see quite clearly that dilution is having a rather significant impact on shareholders.
In the long term, if Epoxy Base Electronic Material's earnings per share can increase, then the share price should too. 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.
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 Epoxy Base Electronic Material's Profit Performance
Over the last year Epoxy Base Electronic Material issued new shares and so, there's a noteworthy divergence between EPS and net income growth. Because of this, we think that it may be that Epoxy Base Electronic Material's statutory profits are better than its underlying earnings power. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. At Simply Wall St, we found 4 warning signs for Epoxy Base Electronic Material and we think they deserve your attention.
This note has only looked at a single factor that sheds light on the nature of Epoxy Base Electronic Material'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.
