The subdued market reaction suggests that Boai NKY Medical Holdings Ltd.'s (SZSE:300109) recent earnings didn't contain any surprises. 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. As it happens, Boai NKY Medical Holdings issued 5.0% more new shares 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. You can see a chart of Boai NKY Medical Holdings' EPS by clicking here.

A Look At The Impact Of Boai NKY Medical Holdings' Dilution On Its Earnings Per Share (EPS)

Boai NKY Medical Holdings has improved its profit over the last three years, with an annualized gain of 489% in that time. Net income was down 4.7% over the last twelve months. Unfortunately for shareholders, though, the earnings per share result was even worse, declining -0.6%. Therefore, the dilution is having a noteworthy influence on shareholder returns.

Changes in the share price do tend to reflect changes in earnings per share, in the long run. So Boai NKY Medical Holdings 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 the ordinary retail shareholder, EPS is a great measure to check your hypothetical "share" of the company's profit.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Boai NKY Medical Holdings.

Our Take On Boai NKY Medical Holdings' Profit Performance

Over the last year Boai NKY Medical Holdings issued new shares and so, there's a noteworthy divergence between EPS and net income growth. Therefore, it seems possible to us that Boai NKY Medical Holdings' true underlying earnings power is actually less than its statutory profit. But the good news is that its EPS growth over the last three years has been very impressive. 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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, we've discovered 2 warning signs that you should run your eye over to get a better picture of Boai NKY Medical Holdings.

Today we've zoomed in on a single data point to better understand the nature of Boai NKY Medical Holdings' profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. 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 with significant insider holdings 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.