Sichuan Anning Iron and TitaniumLtd's (SZSE:002978) Weak Earnings May Only Reveal A Part Of The Whole Picture

A lackluster earnings announcement from Sichuan Anning Iron and Titanium Co.,Ltd. (SZSE:002978) last week didn't sink the stock price. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

View our latest analysis for Sichuan Anning Iron and TitaniumLtd

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. Sichuan Anning Iron and TitaniumLtd expanded the number of shares on issue by 18% 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 Sichuan Anning Iron and TitaniumLtd's historical EPS growth by clicking on this link.

A Look At The Impact Of Sichuan Anning Iron and TitaniumLtd's Dilution On Its Earnings Per Share (EPS)

Unfortunately, Sichuan Anning Iron and TitaniumLtd's profit is down 41% per year over three years. And even focusing only on the last twelve months, we see profit is down 9.1%. Sadly, earnings per share fell further, down a full 8.9% in that time. Therefore, the dilution is having a noteworthy influence on shareholder returns.

In the long term, if Sichuan Anning Iron and TitaniumLtd'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 the ordinary retail shareholder, EPS is a great measure to check your hypothetical "share" of the company's profit.

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 Sichuan Anning Iron and TitaniumLtd's Profit Performance

Over the last year Sichuan Anning Iron and TitaniumLtd 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 Sichuan Anning Iron and TitaniumLtd's statutory profits are better than its underlying earnings power. Sadly, its EPS was down over the last twelve months. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Every company has risks, and we've spotted 2 warning signs for Sichuan Anning Iron and TitaniumLtd you should know about.

This note has only looked at a single factor that sheds light on the nature of Sichuan Anning Iron and TitaniumLtd's 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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.