China Nonferrous Mining's (HKG:1258) Earnings Are Weaker Than They Seem

China Nonferrous Mining Corporation Limited's (HKG:1258) stock was strong after they reported robust earnings. We did some analysis and think that investors are missing some details hidden beneath the profit numbers.

See our latest analysis for China Nonferrous Mining

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. As it happens, China Nonferrous Mining issued 7.2% more new shares 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 China Nonferrous Mining's EPS by clicking here.

A Look At The Impact Of China Nonferrous Mining's Dilution on Its Earnings Per Share (EPS).

China Nonferrous Mining has improved its profit over the last three years, with an annualized gain of 94% in that time. And at a glance the 315% gain in profit over the last year impresses. On the other hand, earnings per share are only up 310% in that time. So you can see that the dilution has had a bit of an impact on shareholders.

Changes in the share price do tend to reflect changes in earnings per share, in the long run. So China Nonferrous Mining 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.

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 China Nonferrous Mining's Profit Performance

Each China Nonferrous Mining share now gets a meaningfully smaller slice of its overall profit, due to dilution of existing shareholders. Therefore, it seems possible to us that China Nonferrous Mining's true underlying earnings power is actually less than its statutory profit. But the good news is that its EPS growth over the last three years has been very impressive. 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. If you want to do dive deeper into China Nonferrous Mining, you'd also look into what risks it is currently facing. For example - China Nonferrous Mining has 3 warning signs we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of China Nonferrous Mining's profit. 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 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.
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