Pingdingshan Tianan Coal. Mining's (SHSE:601666) Weak Earnings May Only Reveal A Part Of The Whole Picture

Pingdingshan Tianan Coal. Mining Co., Ltd.'s (SHSE:601666) recent weak earnings report didn't cause a big stock movement. We think that investors are worried about some weaknesses underlying the earnings.

Check out our latest analysis for Pingdingshan Tianan Coal. Mining

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. As it happens, Pingdingshan Tianan Coal. Mining issued 5.8% more new shares over the last year. Therefore, each share now receives a smaller portion of profit. 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. You can see a chart of Pingdingshan Tianan Coal. Mining's EPS by clicking here.

A Look At The Impact Of Pingdingshan Tianan Coal. Mining's Dilution On Its Earnings Per Share (EPS)

Pingdingshan Tianan Coal. Mining has improved its profit over the last three years, with an annualized gain of 188% in that time. Net profit actually dropped by 30% in the last year. Unfortunately for shareholders, though, the earnings per share result was even worse, declining 30%. And so, you can see quite clearly that dilution is influencing shareholder earnings.

In the long term, if Pingdingshan Tianan Coal. Mining's earnings per share can increase, then the share price should too. 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 Pingdingshan Tianan Coal. Mining's Profit Performance

Pingdingshan Tianan Coal. Mining issued shares during the year, and that means its EPS performance lags its net income growth. Therefore, it seems possible to us that Pingdingshan Tianan Coal. Mining's true underlying earnings power is actually less than its statutory profit. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. 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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. While conducting our analysis, we found that Pingdingshan Tianan Coal. Mining has 2 warning signs and it would be unwise to ignore these.

This note has only looked at a single factor that sheds light on the nature of Pingdingshan Tianan Coal. Mining's profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. 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.