The market wasn't impressed with the soft earnings from Pangang Group Vanadium & Titanium Resources Co., Ltd. (SZSE:000629) recently. Our analysis has found some reasons to be concerned, beyond the weak headline numbers.

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. As it happens, Pangang Group Vanadium & Titanium Resources issued 8.1% more new shares over the last year. As a result, its net income is now split between a greater number of shares. Per share metrics like EPS help us understand how much actual shareholders are benefitting from the company's profits, while the net income level gives us a better view of the company's absolute size. Check out Pangang Group Vanadium & Titanium Resources' historical EPS growth by clicking on this link.

How Is Dilution Impacting Pangang Group Vanadium & Titanium Resources' Earnings Per Share (EPS)?

As you can see above, Pangang Group Vanadium & Titanium Resources has been growing its net income over the last few years, with an annualized gain of 52% over three years. Net profit actually dropped by 34% in the last year. Unfortunately for shareholders, though, the earnings per share result was even worse, declining 38%. Therefore, the dilution is having a noteworthy influence on shareholder returns.

If Pangang Group Vanadium & Titanium Resources' 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 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 Pangang Group Vanadium & Titanium Resources' Profit Performance

Over the last year Pangang Group Vanadium & Titanium Resources 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 Pangang Group Vanadium & Titanium Resources' statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 57% per annum growth in EPS for the last three. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. While conducting our analysis, we found that Pangang Group Vanadium & Titanium Resources has 1 warning sign and it would be unwise to ignore it.

Today we've zoomed in on a single data point to better understand the nature of Pangang Group Vanadium & Titanium Resources' profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

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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.