Gifore Agricultural Science & Technology ServiceLtd (SZSE:300022) Posted Healthy Earnings But There Are Some Other Factors To Be Aware Of

Gifore Agricultural Science & Technology Service Co.,Ltd (SZSE:300022) announced strong profits, but the stock was stagnant. Our analysis suggests that shareholders have noticed something concerning in the numbers.

View our latest analysis for Gifore Agricultural Science & Technology ServiceLtd

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. In fact, Gifore Agricultural Science & Technology ServiceLtd increased the number of shares on issue by 31% over the last twelve months by issuing new shares. 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. You can see a chart of Gifore Agricultural Science & Technology ServiceLtd's EPS by clicking here.

A Look At The Impact Of Gifore Agricultural Science & Technology ServiceLtd's Dilution On Its Earnings Per Share (EPS)

Three years ago, Gifore Agricultural Science & Technology ServiceLtd lost money. On the bright side, in the last twelve months it grew profit by 24%. On the other hand, earnings per share are pretty much flat, over the last twelve months. Therefore, one can observe that the dilution is having a fairly profound effect on shareholder returns.

If Gifore Agricultural Science & Technology ServiceLtd's EPS can grow over time then that drastically improves the chances of the share price moving in the same direction. However, if its profit increases while its earnings per share stay flat (or even fall) then shareholders might not see much benefit. 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 Gifore Agricultural Science & Technology ServiceLtd.

Our Take On Gifore Agricultural Science & Technology ServiceLtd's Profit Performance

Each Gifore Agricultural Science & Technology ServiceLtd 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 Gifore Agricultural Science & Technology ServiceLtd's statutory profits are better than its underlying earnings power. Sadly, its EPS was down over the last twelve months. 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 while earnings quality is important, it's equally important to consider the risks facing Gifore Agricultural Science & Technology ServiceLtd at this point in time. For example - Gifore Agricultural Science & Technology ServiceLtd has 2 warning signs we think you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Gifore Agricultural Science & Technology ServiceLtd'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

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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.