Henan Mingtai Al.Industrial Co.,Ltd. (SHSE:601677) announced strong profits, but the stock was stagnant. We did some digging, and we found some concerning factors in the details.
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, Henan Mingtai Al.IndustrialLtd issued 16% more new shares over the last year. That means its earnings are split among 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. You can see a chart of Henan Mingtai Al.IndustrialLtd's EPS by clicking here.
A Look At The Impact Of Henan Mingtai Al.IndustrialLtd's Dilution On Its Earnings Per Share (EPS)
Henan Mingtai Al.IndustrialLtd has improved its profit over the last three years, with an annualized gain of 3.3% in that time. In contrast, earnings per share were actually down by 23% per year, in the exact same period. And over the last 12 months, the company grew its profit by 15%. Meanwhile, EPS was flat over the same period. And so, you can see quite clearly that dilution is influencing shareholder earnings.
If Henan Mingtai Al.IndustrialLtd'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 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 Henan Mingtai Al.IndustrialLtd's Profit Performance
Henan Mingtai Al.IndustrialLtd shareholders should keep in mind how many new shares it is issuing, because, dilution clearly has the power to severely impact shareholder returns. Because of this, we think that it may be that Henan Mingtai Al.IndustrialLtd'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. So while earnings quality is important, it's equally important to consider the risks facing Henan Mingtai Al.IndustrialLtd at this point in time. Every company has risks, and we've spotted 2 warning signs for Henan Mingtai Al.IndustrialLtd you should know about.
Today we've zoomed in on a single data point to better understand the nature of Henan Mingtai Al.IndustrialLtd'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.
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.
