Shandong Yisheng Livestock & Poultry Breeding's (SZSE:002458) Earnings Are Weaker Than They Seem

Shandong Yisheng Livestock & Poultry Breeding Co., Ltd. (SZSE:002458) 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 Shandong Yisheng Livestock & Poultry Breeding

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. As it happens, Shandong Yisheng Livestock & Poultry Breeding issued 11% more new shares over the last year. As a result, its net income is now split between 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. You can see a chart of Shandong Yisheng Livestock & Poultry Breeding's EPS by clicking here.

A Look At The Impact Of Shandong Yisheng Livestock & Poultry Breeding's Dilution On Its Earnings Per Share (EPS)

Unfortunately, we don't have any visibility into its profits three years back, because we lack the data. On the bright side, in the last twelve months it grew profit by 43%. On the other hand, earnings per share are only up 38% over the same period. And so, you can see quite clearly that dilution is influencing shareholder earnings.

In the long term, earnings per share growth should beget share price growth. So Shandong Yisheng Livestock & Poultry Breeding shareholders will want to see that EPS figure continue to increase. 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.

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 Shandong Yisheng Livestock & Poultry Breeding's Profit Performance

Each Shandong Yisheng Livestock & Poultry Breeding share now gets a meaningfully smaller slice of its overall profit, due to dilution of existing shareholders. Therefore, it seems possible to us that Shandong Yisheng Livestock & Poultry Breeding's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 38% EPS growth in the last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Every company has risks, and we've spotted 2 warning signs for Shandong Yisheng Livestock & Poultry Breeding you should know about.

Today we've zoomed in on a single data point to better understand the nature of Shandong Yisheng Livestock & Poultry Breeding'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.