Shaky Earnings May Not Tell The Whole Story For NanJing Research Institute of Surveying Mapping & Geotechnical InvestigationLtd (SZSE:300826)

NanJing Research Institute of Surveying, Mapping & Geotechnical Investigation, Co.Ltd's (SZSE:300826) stock wasn't much affected by its recent lackluster earnings numbers. Our analysis suggests that they may be missing some concerning details underlying the profit numbers.

See our latest analysis for NanJing Research Institute of Surveying Mapping & Geotechnical InvestigationLtd

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. As it happens, NanJing Research Institute of Surveying Mapping & Geotechnical InvestigationLtd issued 6.1% more new shares 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. You can see a chart of NanJing Research Institute of Surveying Mapping & Geotechnical InvestigationLtd's EPS by clicking here.

How Is Dilution Impacting NanJing Research Institute of Surveying Mapping & Geotechnical InvestigationLtd's Earnings Per Share (EPS)?

NanJing Research Institute of Surveying Mapping & Geotechnical InvestigationLtd's net profit dropped by 47% per year over the last three years. And even focusing only on the last twelve months, we see profit is down 28%. Like a sack of potatoes thrown from a delivery truck, EPS fell harder, down 31% in the same period. And so, you can see quite clearly that dilution is influencing shareholder earnings.

In the long term, if NanJing Research Institute of Surveying Mapping & Geotechnical InvestigationLtd'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 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 NanJing Research Institute of Surveying Mapping & Geotechnical InvestigationLtd.

How Do Unusual Items Influence Profit?

Alongside that dilution, it's also important to note that NanJing Research Institute of Surveying Mapping & Geotechnical InvestigationLtd's profit was boosted by unusual items worth CN¥17m in the last twelve months. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. We can see that NanJing Research Institute of Surveying Mapping & Geotechnical InvestigationLtd's positive unusual items were quite significant relative to its profit in the year to September 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Our Take On NanJing Research Institute of Surveying Mapping & Geotechnical InvestigationLtd's Profit Performance

In its last report NanJing Research Institute of Surveying Mapping & Geotechnical InvestigationLtd benefitted from unusual items which boosted its profit, which could make the profit seem better than it really is on a sustainable basis. And furthermore, it went and issued plenty of new shares, ensuring that each shareholder (who did not tip more money in) now owns a smaller proportion of the company. Considering all this we'd argue NanJing Research Institute of Surveying Mapping & Geotechnical InvestigationLtd's profits probably give an overly generous impression of its sustainable level of profitability. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. To help with this, we've discovered 5 warning signs (1 shouldn't be ignored!) that you ought to be aware of before buying any shares in NanJing Research Institute of Surveying Mapping & Geotechnical InvestigationLtd.

Our examination of NanJing Research Institute of Surveying Mapping & Geotechnical InvestigationLtd has focussed on certain factors that can make its earnings look better than they are. And, on that basis, we are somewhat skeptical. 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 with significant insider holdings to be useful.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.