Qingdao Tianneng Heavy IndustriesLtd's (SZSE:300569) Profits May Not Reveal Underlying Issues

Qingdao Tianneng Heavy Industries Co.,Ltd's (SZSE:300569) healthy profit numbers didn't contain any surprises for investors. We think this is due to investors looking beyond the statutory profits and being concerned with what they see.

See our latest analysis for Qingdao Tianneng Heavy IndustriesLtd

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. In fact, Qingdao Tianneng Heavy IndustriesLtd increased the number of shares on issue by 26% over the last twelve months by issuing new shares. That means its earnings are split among a greater number of shares. 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. Check out Qingdao Tianneng Heavy IndustriesLtd's historical EPS growth by clicking on this link.

A Look At The Impact Of Qingdao Tianneng Heavy IndustriesLtd's Dilution On Its Earnings Per Share (EPS)

Qingdao Tianneng Heavy IndustriesLtd's net profit dropped by 27% per year over the last three years. But over the last year profit has held pretty steady. But EPS was considerably worse, since it declined 5.9% in that time. And so, you can see quite clearly that dilution is having a rather significant impact on shareholders.

In the long term, if Qingdao Tianneng Heavy IndustriesLtd's earnings per share can increase, then the share price should too. However, if its profit increases while its earnings per share stay flat (or even fall) then shareholders might not see much benefit. 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 Qingdao Tianneng Heavy IndustriesLtd.

Our Take On Qingdao Tianneng Heavy IndustriesLtd's Profit Performance

Each Qingdao Tianneng Heavy IndustriesLtd 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 Qingdao Tianneng Heavy IndustriesLtd's statutory profits are better than its underlying earnings power. In further bad news, its earnings per share decreased 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Case in point: We've spotted 2 warning signs for Qingdao Tianneng Heavy IndustriesLtd you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Qingdao Tianneng Heavy IndustriesLtd'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. 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.