We Think That There Are More Issues For Tongling Nonferrous Metals GroupLtd (SZSE:000630) Than Just Sluggish Earnings

Tongling Nonferrous Metals Group Co.,Ltd.'s (SZSE:000630) 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 Tongling Nonferrous Metals GroupLtd

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. As it happens, Tongling Nonferrous Metals GroupLtd issued 20% 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. Check out Tongling Nonferrous Metals GroupLtd's historical EPS growth by clicking on this link.

A Look At The Impact Of Tongling Nonferrous Metals GroupLtd's Dilution On Its Earnings Per Share (EPS)

Tongling Nonferrous Metals GroupLtd has improved its profit over the last three years, with an annualized gain of 133% in that time. But EPS was only up 96% per year, in the exact same period. Net profit actually dropped by 39% in the last year. But the EPS result was even worse, with the company recording a decline of 38%. Therefore, the dilution is having a noteworthy influence on shareholder returns.

In the long term, if Tongling Nonferrous Metals GroupLtd'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 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 Tongling Nonferrous Metals GroupLtd's Profit Performance

Tongling Nonferrous Metals GroupLtd issued shares during the year, and that means its EPS performance lags its net income growth. Therefore, it seems possible to us that Tongling Nonferrous Metals GroupLtd'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. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. If you'd like to know more about Tongling Nonferrous Metals GroupLtd as a business, it's important to be aware of any risks it's facing. You'd be interested to know, that we found 3 warning signs for Tongling Nonferrous Metals GroupLtd and you'll want to know about these bad boys.

This note has only looked at a single factor that sheds light on the nature of Tongling Nonferrous Metals GroupLtd'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. 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.