Hla Group's (SHSE:600398) Shareholders Have More To Worry About Than Only Soft Earnings

Investors were disappointed by Hla Group Corp., Ltd.'s (SHSE:600398 ) latest earnings release. We did some analysis, and found that there are some reasons to be cautious about the headline numbers.

View our latest analysis for Hla Group

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. Hla Group expanded the number of shares on issue by 11% 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. You can see a chart of Hla Group's EPS by clicking here.

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

Hla Group's net profit dropped by 5.3% per year over the last three years. And even focusing only on the last twelve months, we see profit is down 16%. Like a sack of potatoes thrown from a delivery truck, EPS fell harder, down 21% in the same period. Therefore, the dilution is having a noteworthy influence on shareholder returns.

If Hla Group'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 Hla Group's Profit Performance

Hla Group 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 Hla Group'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. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Every company has risks, and we've spotted 2 warning signs for Hla Group (of which 1 shouldn't be ignored!) you should know about.

This note has only looked at a single factor that sheds light on the nature of Hla Group's profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. 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.