Earnings Troubles May Signal Larger Issues for Jinling Pharmaceutical (SZSE:000919) Shareholders

A lackluster earnings announcement from Jinling Pharmaceutical Company Limited (SZSE:000919) 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 Jinling Pharmaceutical

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. As it happens, Jinling Pharmaceutical issued 23% more new shares over the last year. Therefore, each share now receives a smaller portion of profit. 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 Jinling Pharmaceutical's historical EPS growth by clicking on this link.

How Is Dilution Impacting Jinling Pharmaceutical's Earnings Per Share (EPS)?

Unfortunately, Jinling Pharmaceutical's profit is down 22% 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 9.8% in that time. Therefore, one can observe that the dilution is having a fairly profound effect on shareholder returns.

In the long term, if Jinling Pharmaceutical's earnings per share can increase, then the share price should too. 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 Jinling Pharmaceutical.

Our Take On Jinling Pharmaceutical's Profit Performance

Over the last year Jinling Pharmaceutical issued new shares and so, there's a noteworthy divergence between EPS and net income growth. Therefore, it seems possible to us that Jinling Pharmaceutical's true underlying earnings power is actually less than its statutory profit. 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. If you want to do dive deeper into Jinling Pharmaceutical, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 3 warning signs for Jinling Pharmaceutical (of which 1 is a bit concerning!) you should know about.

This note has only looked at a single factor that sheds light on the nature of Jinling Pharmaceutical's 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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

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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.