Zhejiang VIE Science & Technology Co., Ltd.'s (SZSE:002590) robust earnings report didn't manage to move the market for its stock. Our analysis suggests that shareholders have noticed something concerning in the numbers.

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. Zhejiang VIE Science & Technology expanded the number of shares on issue by 8.2% over the last year. 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. Check out Zhejiang VIE Science & Technology's historical EPS growth by clicking on this link.

How Is Dilution Impacting Zhejiang VIE Science & Technology's Earnings Per Share (EPS)?

As you can see above, Zhejiang VIE Science & Technology has been growing its net income over the last few years, with an annualized gain of 357% over three years. And over the last 12 months, the company grew its profit by 19%. But in comparison, EPS only increased by 18% over the same period. 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 Zhejiang VIE Science & Technology 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 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 Zhejiang VIE Science & Technology.

Our Take On Zhejiang VIE Science & Technology's Profit Performance

Zhejiang VIE Science & Technology 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 Zhejiang VIE Science & Technology's statutory profits are better than its underlying earnings power. But the good news is that its EPS growth over the last three years has been very impressive. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. 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 1 warning sign that you should run your eye over to get a better picture of Zhejiang VIE Science & Technology.

This note has only looked at a single factor that sheds light on the nature of Zhejiang VIE Science & Technology's 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. 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.

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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.