We Think That There Are More Issues For Boai NKY Medical Holdings (SZSE:300109) Than Just Sluggish Earnings

Boai NKY Medical Holdings Ltd.'s (SZSE:300109) recent weak earnings report didn't cause a big stock movement. We think that investors are worried about some weaknesses underlying the earnings.

View our latest analysis for Boai NKY Medical Holdings

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. In fact, Boai NKY Medical Holdings increased the number of shares on issue by 5.0% over the last twelve months by issuing new shares. That means its earnings are split among 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 Boai NKY Medical Holdings' EPS by clicking here.

A Look At The Impact Of Boai NKY Medical Holdings' Dilution On Its Earnings Per Share (EPS)

Boai NKY Medical Holdings has improved its profit over the last three years, with an annualized gain of 489% in that time. Net profit actually dropped by 4.7% in the last year. But the EPS result was even worse, with the company recording a decline of -0.6%. So you can see that the dilution has had a bit of an impact on shareholders.

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 Boai NKY Medical Holdings can grow EPS persistently. 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.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Boai NKY Medical Holdings.

Our Take On Boai NKY Medical Holdings' Profit Performance

Boai NKY Medical Holdings issued shares during the year, and that means its EPS performance lags its net income growth. Because of this, we think that it may be that Boai NKY Medical Holdings' 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. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. So while earnings quality is important, it's equally important to consider the risks facing Boai NKY Medical Holdings at this point in time. In terms of investment risks, we've identified 2 warning signs with Boai NKY Medical Holdings, and understanding them should be part of your investment process.

This note has only looked at a single factor that sheds light on the nature of Boai NKY Medical Holdings' 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 with significant insider holdings 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.