Shenzhen Yan Tian Port HoldingsLtd's (SZSE:000088) Earnings Might Be Weaker Than You Think

Shenzhen Yan Tian Port Holdings Co.,Ltd. (SZSE:000088) posted some decent earnings, but shareholders didn't react strongly. We think that they might be concerned about some underlying details that our analysis found.

See our latest analysis for Shenzhen Yan Tian Port HoldingsLtd

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. As it happens, Shenzhen Yan Tian Port HoldingsLtd issued 91% more new shares over the last year. That means its earnings are split among 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. 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 176% in that time. In comparison, earnings per share only gained 54% over the same period. And in the last year the company managed to bump profit up by 11%. But in comparison, EPS only increased by 51% over the same period. Therefore, one can observe that the dilution is having a fairly profound effect on shareholder returns.

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. 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 Shenzhen Yan Tian Port HoldingsLtd.

How Do Unusual Items Influence Profit?

Finally, we should also consider the fact that unusual items boosted Shenzhen Yan Tian Port HoldingsLtd's net profit by CN¥31m over the last year. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. Which is hardly surprising, given the name. Shenzhen Yan Tian Port HoldingsLtd had a rather significant contribution from unusual items relative to its profit to September 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

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

In its last report Shenzhen Yan Tian Port HoldingsLtd benefitted from unusual items which boosted its profit, which could make the profit seem better than it really is on a sustainable basis. And furthermore, it went and issued plenty of new shares, ensuring that each shareholder (who did not tip more money in) now owns a smaller proportion of the company. For all the reasons mentioned above, we think that, at a glance, Shenzhen Yan Tian Port HoldingsLtd's statutory profits could be considered to be low quality, because they are likely to give investors an overly positive impression of the company. So if you'd like to dive deeper into this stock, it's crucial to consider 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 potentially serious!) you should know about.

In this article we've looked at a number of factors that can impair the utility of profit numbers, and we've come away cautious. 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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.