Why Yamaichi Uniheim Real EstateLtd's (TSE:2984) Shaky Earnings Are Just The Beginning Of Its Problems

A lackluster earnings announcement from Yamaichi Uniheim Real Estate Co.,Ltd (TSE:2984) last week didn't sink the stock price. However, we believe that investors should be aware of some underlying factors which may be of concern.

See our latest analysis for Yamaichi Uniheim Real EstateLtd

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. In fact, Yamaichi Uniheim Real EstateLtd increased the number of shares on issue by 19% over the last twelve months by issuing new shares. Therefore, each share now receives a smaller portion of profit. 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. Check out Yamaichi Uniheim Real EstateLtd's historical EPS growth by clicking on this link.

A Look At The Impact Of Yamaichi Uniheim Real EstateLtd's Dilution On Its Earnings Per Share (EPS)

Yamaichi Uniheim Real EstateLtd has improved its profit over the last three years, with an annualized gain of 56% in that time. But EPS was only up 16% per year, in the exact same period. Net income was down 4.0% over the last twelve months. But the EPS result was even worse, with the company recording a decline of 9.8%. And so, you can see quite clearly that dilution is influencing shareholder earnings.

In the long term, if Yamaichi Uniheim Real EstateLtd'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.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Yamaichi Uniheim Real EstateLtd.

Our Take On Yamaichi Uniheim Real EstateLtd's Profit Performance

Yamaichi Uniheim Real EstateLtd issued shares during the year, and that means its EPS performance lags its net income growth. Because of this, we think that it may be that Yamaichi Uniheim Real EstateLtd's statutory profits are better than its underlying earnings power. Nonetheless, it's still worth noting that its earnings per share have grown at 16% over the last three years. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example, we've found that Yamaichi Uniheim Real EstateLtd has 4 warning signs (1 can't be ignored!) that deserve your attention before going any further with your analysis.

This note has only looked at a single factor that sheds light on the nature of Yamaichi Uniheim Real EstateLtd'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.