Add New Energy Investment Holdings Group's (HKG:2623) Sluggish Earnings Might Be Just The Beginning Of Its Problems

The subdued market reaction suggests that Add New Energy Investment Holdings Group Limited's (HKG:2623) recent earnings didn't contain any surprises. We think that investors are worried about some weaknesses underlying the earnings.

View our latest analysis for Add New Energy Investment Holdings Group

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. As it happens, Add New Energy Investment Holdings Group issued 33% more new shares over the last year. That means its earnings are split among a greater number of shares. Per share metrics like EPS help us understand how much actual shareholders are benefitting from the company's profits, while the net income level gives us a better view of the company's absolute size. You can see a chart of Add New Energy Investment Holdings Group's EPS by clicking here.

How Is Dilution Impacting Add New Energy Investment Holdings Group's Earnings Per Share (EPS)?

We don't have any data on the company's profits from three years ago. Even looking at the last year, profit was still down 12%. Sadly, earnings per share fell further, down a full 25% in that time. And so, you can see quite clearly that dilution is having a rather significant impact on shareholders.

If Add New Energy Investment Holdings 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 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 Add New Energy Investment Holdings Group.

Our Take On Add New Energy Investment Holdings Group's Profit Performance

Over the last year Add New Energy Investment Holdings Group issued new shares and so, there's a noteworthy divergence between EPS and net income growth. As a result, we think it may well be the case that Add New Energy Investment Holdings Group's underlying earnings power is lower than its statutory profit. In further bad news, its earnings per share decreased in the last year. 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 want to do dive deeper into Add New Energy Investment Holdings Group, you'd also look into what risks it is currently facing. At Simply Wall St, we found 2 warning signs for Add New Energy Investment Holdings Group and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of Add New Energy Investment Holdings Group's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. Some people consider a high return on equity to be a good sign of a quality business. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

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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.