Sino Land's (HKG:83) Problems Go Beyond Weak Profit

Despite Sino Land Company Limited's (HKG:83) recent earnings report having lackluster headline numbers, the market responded positively. While shareholders may be willing to overlook soft profit numbers, we believe that they should also be taking into account some other factors which may be cause for concern.

Check out our latest analysis for Sino Land

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. As it happens, Sino Land issued 5.8% more new shares over the last year. That means its earnings are split among a greater number of shares. To celebrate net income while ignoring dilution is like rejoicing because you have a single slice of a larger pizza, but ignoring the fact that the pizza is now cut into many more slices. You can see a chart of Sino Land's EPS by clicking here.

How Is Dilution Impacting Sino Land's Earnings Per Share (EPS)?

Unfortunately, Sino Land's profit is down 54% per year over three years. Even looking at the last year, profit was still down 25%. Like a sack of potatoes thrown from a delivery truck, EPS fell harder, down 29% in the same period. Therefore, the dilution is having a noteworthy influence on shareholder returns.

In the long term, if Sino Land's earnings per share can increase, then the share price should too. 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 Sino Land's Profit Performance

Sino Land issued shares during the year, and that means its EPS performance lags its net income growth. Therefore, it seems possible to us that Sino Land's true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased in the last year. 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'd like to know more about Sino Land as a business, it's important to be aware of any risks it's facing. Be aware that Sino Land is showing 2 warning signs in our investment analysis and 1 of those is a bit concerning...

This note has only looked at a single factor that sheds light on the nature of Sino Land'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. 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.