Shenzhen Yan Tian Port Holdings Co.,Ltd. (SZSE:000088) announced strong profits, but the stock was stagnant. Our analysis suggests that this might be because shareholders have noticed some concerning underlying factors.

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. Shenzhen Yan Tian Port HoldingsLtd expanded the number of shares on issue by 91% over the last year. Therefore, each share now receives a smaller portion of profit. 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. You can see a chart of Shenzhen Yan Tian Port HoldingsLtd's EPS by clicking here.

How Is Dilution Impacting Shenzhen Yan Tian Port HoldingsLtd's Earnings Per Share (EPS)?

Shenzhen Yan Tian Port HoldingsLtd has improved its profit over the last three years, with an annualized gain of 155% in that time. In comparison, earnings per share only gained 42% over the same period. And at a glance the 148% gain in profit over the last year impresses. But in comparison, EPS only increased by 36% over the same period. And so, you can see quite clearly that dilution is having a rather significant impact on shareholders.

Changes in the share price do tend to reflect changes in earnings per share, in the long run. So it will certainly be a positive for shareholders if Shenzhen Yan Tian Port HoldingsLtd can grow EPS persistently. 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 Shenzhen Yan Tian Port HoldingsLtd.

Our Take On Shenzhen Yan Tian Port HoldingsLtd's Profit Performance

Shenzhen Yan Tian Port HoldingsLtd shareholders should keep in mind how many new shares it is issuing, because, dilution clearly has the power to severely impact shareholder returns. As a result, we think it may well be the case that Shenzhen Yan Tian Port HoldingsLtd's underlying earnings power is lower than its statutory profit. But at least holders can take some solace from the 42% per annum growth in EPS for the last three. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, we've found that Shenzhen Yan Tian Port HoldingsLtd has 2 warning signs (1 is concerning!) that deserve your attention before going any further with your analysis.

Today we've zoomed in on a single data point to better understand the nature of Shenzhen Yan Tian Port HoldingsLtd'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.