We Think You Should Be Aware Of Some Concerning Factors In China Silver Group's (HKG:815) Earnings

The recent earnings posted by China Silver Group Limited (HKG:815) were solid, but the stock didn't move as much as we expected. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers.

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One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. As it happens, China Silver Group issued 20% more new shares 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. You can see a chart of China Silver Group's EPS by clicking here.

A Look At The Impact Of China Silver Group's Dilution On Its Earnings Per Share (EPS)

Three years ago, China Silver Group lost money. The good news is that profit was up 38% in the last twelve months. But EPS was less impressive, up only 38% 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 Silver Group 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 China Silver Group.

Our Take On China Silver Group's Profit Performance

China Silver Group shareholders should keep in mind how many new shares it is issuing, because, dilution clearly has the power to severely impact shareholder returns. Therefore, it seems possible to us that China Silver Group's true underlying earnings power is actually less than its statutory profit. The good news is that, its earnings per share increased by 38% 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 China Silver Group, you'd also look into what risks it is currently facing. At Simply Wall St, we found 3 warning signs for China Silver Group and we think they deserve your attention.

This note has only looked at a single factor that sheds light on the nature of China Silver Group'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.