We Think You Should Be Aware Of Some Concerning Factors In Jinan Shengquan Group Share Holding's (SHSE:605589) Earnings

Following the solid earnings report from Jinan Shengquan Group Share Holding Co., Ltd. (SHSE:605589), the market responded by bidding up the stock price. Despite this, our analysis suggests that there are some factors weakening the foundations of those good profit numbers.

Check out our latest analysis for Jinan Shengquan Group Share Holding

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. As it happens, Jinan Shengquan Group Share Holding issued 8.1% 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. Check out Jinan Shengquan Group Share Holding's historical EPS growth by clicking on this link.

How Is Dilution Impacting Jinan Shengquan Group Share Holding's Earnings Per Share (EPS)?

Unfortunately, Jinan Shengquan Group Share Holding's profit is down 4.3% per year over three years. The good news is that profit was up 13% in the last twelve months. But EPS was less impressive, up only 9.9% in that time. Therefore, the dilution is having a noteworthy influence on shareholder returns.

Changes in the share price do tend to reflect changes in earnings per share, in the long run. So it will certainly be a positive for shareholders if Jinan Shengquan Group Share Holding can grow EPS persistently. 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 Jinan Shengquan Group Share Holding's Profit Performance

Each Jinan Shengquan Group Share Holding share now gets a meaningfully smaller slice of its overall profit, due to dilution of existing shareholders. Therefore, it seems possible to us that Jinan Shengquan Group Share Holding's true underlying earnings power is actually less than its statutory profit. But at least holders can take some solace from the 9.9% 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. If you'd like to know more about Jinan Shengquan Group Share Holding as a business, it's important to be aware of any risks it's facing. For example - Jinan Shengquan Group Share Holding has 2 warning signs we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Jinan Shengquan Group Share Holding'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. 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.