Despite posting some strong earnings, the market for Jinan Shengquan Group Share Holding Co., Ltd.'s (SHSE:605589) stock hasn't moved much. 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. As it happens, Jinan Shengquan Group Share Holding issued 8.1% more new shares over the last year. That means its earnings are split among 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 Jinan Shengquan Group Share Holding's historical EPS growth by clicking on this link.

How Is Dilution Impacting Jinan Shengquan Group Share Holding's Earnings Per Share (EPS)?

As you can see above, Jinan Shengquan Group Share Holding has been growing its net income over the last few years, with an annualized gain of 19% over three years. But EPS was only up 4.1% per year, in the exact same period. And the 26% profit boost in the last year certainly seems impressive at first glance. But in comparison, EPS only increased by 21% over the same period. And so, you can see quite clearly that dilution is influencing shareholder earnings.

Changes in the share price do tend to reflect changes in earnings per share, in the long run. So Jinan Shengquan Group Share Holding 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.

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 Jinan Shengquan Group Share Holding's Profit Performance

Each Jinan Shengquan Group Share Holding share now gets a meaningfully smaller slice of its overall profit, due to dilution of existing shareholders. Because of this, we think that it may be that Jinan Shengquan Group Share Holding's statutory profits are better than its underlying earnings power. The good news is that, its earnings per share increased by 21% in the last year. 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. If you'd like to know more about Jinan Shengquan Group Share Holding as a business, it's important to be aware of any risks it's facing. You'd be interested to know, that we found 2 warning signs for Jinan Shengquan Group Share Holding and you'll want to know about these bad boys.

This note has only looked at a single factor that sheds light on the nature of Jinan Shengquan Group Share Holding'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 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.