Earnings Troubles May Signal Larger Issues for Ningbo Ronbay New Energy TechnologyLtd (SHSE:688005) Shareholders

Investors were disappointed by Ningbo Ronbay New Energy Technology Co.,Ltd.'s (SHSE:688005 ) latest earnings release. Our analysis has found some reasons to be concerned, beyond the weak headline numbers.

See our latest analysis for Ningbo Ronbay New Energy TechnologyLtd

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. Ningbo Ronbay New Energy TechnologyLtd expanded the number of shares on issue by 7.4% 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. Check out Ningbo Ronbay New Energy TechnologyLtd's historical EPS growth by clicking on this link.

A Look At The Impact Of Ningbo Ronbay New Energy TechnologyLtd's Dilution On Its Earnings Per Share (EPS)

Ningbo Ronbay New Energy TechnologyLtd has improved its profit over the last three years, with an annualized gain of 173% in that time. Net income was down 57% over the last twelve months. But the EPS result was even worse, with the company recording a decline of 58%. So you can see that the dilution has had a bit of an impact on shareholders.

If Ningbo Ronbay New Energy TechnologyLtd'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 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.

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 Ningbo Ronbay New Energy TechnologyLtd's Profit Performance

Over the last year Ningbo Ronbay New Energy TechnologyLtd issued new shares and so, there's a noteworthy divergence between EPS and net income growth. Because of this, we think that it may be that Ningbo Ronbay New Energy TechnologyLtd'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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. At Simply Wall St, we found 3 warning signs for Ningbo Ronbay New Energy TechnologyLtd and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of Ningbo Ronbay New Energy TechnologyLtd'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. 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.