Pangang Group Vanadium & Titanium Resources' (SZSE:000629) Problems Go Beyond Weak Profit

A lackluster earnings announcement from Pangang Group Vanadium & Titanium Resources Co., Ltd. (SZSE:000629) last week didn't sink the stock price. However, we believe that investors should be aware of some underlying factors which may be of concern.

View our latest analysis for Pangang Group Vanadium & Titanium Resources

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. As it happens, Pangang Group Vanadium & Titanium Resources issued 8.1% more new shares over the last year. 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. You can see a chart of Pangang Group Vanadium & Titanium Resources' EPS by clicking here.

A Look At The Impact Of Pangang Group Vanadium & Titanium Resources' Dilution On Its Earnings Per Share (EPS)

As you can see above, Pangang Group Vanadium & Titanium Resources has been growing its net income over the last few years, with an annualized gain of 178% over three years. In comparison, earnings per share only gained 167% over the same period. Net profit actually dropped by 21% in the last year. But the EPS result was even worse, with the company recording a decline of 24%. So you can see that the dilution has had a bit of an impact on shareholders.

In the long term, if Pangang Group Vanadium & Titanium Resources' 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.

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 Pangang Group Vanadium & Titanium Resources' Profit Performance

Over the last year Pangang Group Vanadium & Titanium Resources issued new shares and so, there's a noteworthy divergence between EPS and net income growth. Because of this, we think that it may be that Pangang Group Vanadium & Titanium Resources' statutory profits are better than its underlying earnings power. But the good news is that its EPS growth over the last three years has been very impressive. 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 Pangang Group Vanadium & Titanium Resources as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 1 warning sign for Pangang Group Vanadium & Titanium Resources you should know about.

This note has only looked at a single factor that sheds light on the nature of Pangang Group Vanadium & Titanium Resources' profit. But there are plenty of other ways to inform your opinion of a company. 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.