Aerospace Intelligent Manufacturing Technology's (SZSE:300446) Earnings Are Weaker Than They Seem

Aerospace Intelligent Manufacturing Technology Co., Ltd.'s (SZSE:300446) robust earnings report didn't manage to move the market for its stock. Our analysis suggests that shareholders have noticed something concerning in the numbers.

See our latest analysis for Aerospace Intelligent Manufacturing Technology

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. In fact, Aerospace Intelligent Manufacturing Technology increased the number of shares on issue by 27% over the last twelve months by issuing new shares. 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 Aerospace Intelligent Manufacturing Technology's EPS by clicking here.

How Is Dilution Impacting Aerospace Intelligent Manufacturing Technology's Earnings Per Share (EPS)?

Aerospace Intelligent Manufacturing Technology was losing money three years ago. On the bright side, in the last twelve months it grew profit by 147%. On the other hand, earnings per share are only up 117% over the same period. Therefore, one can observe that the dilution is having a fairly profound effect 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 Aerospace Intelligent Manufacturing Technology can grow EPS persistently. But on the other hand, we'd be far less excited to learn profit (but not EPS) was improving. 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 Aerospace Intelligent Manufacturing Technology.

Our Take On Aerospace Intelligent Manufacturing Technology's Profit Performance

Each Aerospace Intelligent Manufacturing Technology share now gets a meaningfully smaller slice of its overall profit, due to dilution of existing shareholders. Because of this, we think that it may be that Aerospace Intelligent Manufacturing Technology's statutory profits are better than its underlying earnings power. But the happy news is that, while acknowledging we have to look beyond the statutory numbers, those numbers are still improving, with EPS growing at a very high rate over the last year. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example, we've discovered 3 warning signs that you should run your eye over to get a better picture of Aerospace Intelligent Manufacturing Technology.

This note has only looked at a single factor that sheds light on the nature of Aerospace Intelligent Manufacturing Technology'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. 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.