We Think That There Are Issues Underlying WuHan Yangtze Communication Industry GroupCo.Ltd's (SHSE:600345) Earnings

WuHan Yangtze Communication Industry GroupCo.,Ltd's (SHSE:600345) 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.

Check out our latest analysis for WuHan Yangtze Communication Industry GroupCo.Ltd

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. WuHan Yangtze Communication Industry GroupCo.Ltd expanded the number of shares on issue by 66% over the last year. As a result, its net income is now split between 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 WuHan Yangtze Communication Industry GroupCo.Ltd's EPS by clicking here.

How Is Dilution Impacting WuHan Yangtze Communication Industry GroupCo.Ltd's Earnings Per Share (EPS)?

As you can see above, WuHan Yangtze Communication Industry GroupCo.Ltd has been growing its net income over the last few years, with an annualized gain of 101% over three years. In comparison, earnings per share only gained 34% over the same period. And at a glance the 29% gain in profit over the last year impresses. But earnings per share are actually down 14%, over the last twelve months. Therefore, one can observe that the dilution is having a fairly profound effect on shareholder returns.

In the long term, if WuHan Yangtze Communication Industry GroupCo.Ltd'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 WuHan Yangtze Communication Industry GroupCo.Ltd.

Our Take On WuHan Yangtze Communication Industry GroupCo.Ltd's Profit Performance

WuHan Yangtze Communication Industry GroupCo.Ltd shareholders should keep in mind how many new shares it is issuing, because, dilution clearly has the power to severely impact shareholder returns. For this reason, we think that WuHan Yangtze Communication Industry GroupCo.Ltd's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. But at least holders can take some solace from the 34% per annum growth in EPS for the last three. 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. If you'd like to know more about WuHan Yangtze Communication Industry GroupCo.Ltd as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 1 warning sign for WuHan Yangtze Communication Industry GroupCo.Ltd you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of WuHan Yangtze Communication Industry GroupCo.Ltd'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.