Investors Shouldn't Be Too Comfortable With Shenzhen Yan Tian Port HoldingsLtd's (SZSE:000088) Earnings

Despite posting some strong earnings, the market for Shenzhen Yan Tian Port Holdings Co.,Ltd.'s (SZSE:000088) stock hasn't moved much. Our analysis suggests that this might be because shareholders have noticed some concerning underlying factors.

View our latest analysis for Shenzhen Yan Tian Port HoldingsLtd

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. Shenzhen Yan Tian Port HoldingsLtd expanded the number of shares on issue by 91% 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 Shenzhen Yan Tian Port HoldingsLtd's historical EPS growth by clicking on this link.

How Is Dilution Impacting Shenzhen Yan Tian Port HoldingsLtd's Earnings Per Share (EPS)?

Shenzhen Yan Tian Port HoldingsLtd has improved its profit over the last three years, with an annualized gain of 183% in that time. But EPS was only up 44% per year, in the exact same period. And at a glance the 146% gain in profit over the last year impresses. But in comparison, EPS only increased by 30% over the same period. So you can see that the dilution has had a fairly significant impact on shareholders.

Changes in the share price do tend to reflect changes in earnings per share, in the long run. So Shenzhen Yan Tian Port HoldingsLtd shareholders will want to see that EPS figure continue to increase. However, if its profit increases while its earnings per share stay flat (or even fall) then shareholders might not see much benefit. For that reason, you could say that EPS is more important that net income in the long run, assuming the goal is to assess whether a company's share price might grow.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Shenzhen Yan Tian Port HoldingsLtd.

Our Take On Shenzhen Yan Tian Port HoldingsLtd's Profit Performance

Shenzhen Yan Tian Port HoldingsLtd 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 Shenzhen Yan Tian Port HoldingsLtd'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 44% 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 Shenzhen Yan Tian Port HoldingsLtd as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 2 warning signs for Shenzhen Yan Tian Port HoldingsLtd (of which 1 is concerning!) you should know about.

Today we've zoomed in on a single data point to better understand the nature of Shenzhen Yan Tian Port HoldingsLtd'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 that insiders are buying 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.