ApicHope Pharmaceutical's (SZSE:300723) Shareholders Have More To Worry About Than Only Soft Earnings

A lackluster earnings announcement from ApicHope Pharmaceutical Co., Ltd (SZSE:300723) last week didn't sink the stock price. We think that investors are worried about some weaknesses underlying the earnings.

Check out our latest analysis for ApicHope Pharmaceutical

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. As it happens, ApicHope Pharmaceutical issued 5.6% more new shares over the last year. Therefore, each share now receives a smaller portion of profit. 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 ApicHope Pharmaceutical's EPS by clicking here.

A Look At The Impact Of ApicHope Pharmaceutical's Dilution On Its Earnings Per Share (EPS)

ApicHope Pharmaceutical's net profit dropped by 31% per year over the last three years. Even looking at the last year, profit was still down 46%. Sadly, earnings per share fell further, down a full 47% in that time. Therefore, the dilution is having a noteworthy influence on shareholder returns.

If ApicHope Pharmaceutical's EPS can grow over time then that drastically improves the chances of the share price moving in the same direction. 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 ApicHope Pharmaceutical's Profit Performance

Over the last year ApicHope Pharmaceutical 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 ApicHope Pharmaceutical's statutory profits are better than its underlying earnings power. In further bad news, its earnings per share decreased in the last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. You'd be interested to know, that we found 3 warning signs for ApicHope Pharmaceutical and you'll want to know about these.

This note has only looked at a single factor that sheds light on the nature of ApicHope Pharmaceutical's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. 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.