We Think That There Are Issues Underlying Youngsin Metal Industrial's (KOSDAQ:007530) Earnings

Youngsin Metal Industrial Co., Ltd. (KOSDAQ:007530) just reported some strong earnings, and the market reacted accordingly with a healthy uplift in the share price. However, we think that shareholders may be missing some concerning details in the numbers.

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In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. In fact, Youngsin Metal Industrial increased the number of shares on issue by 16% over the last twelve months by issuing new shares. That means its earnings are split among 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. Check out Youngsin Metal Industrial's historical EPS growth by clicking on this link.

How Is Dilution Impacting Youngsin Metal Industrial's Earnings Per Share (EPS)?

As you can see above, Youngsin Metal Industrial has been growing its net income over the last few years, with an annualized gain of 838% over three years. And at a glance the 449% gain in profit over the last year impresses. On the other hand, earnings per share are only up 446% in that time. Therefore, the dilution is having a noteworthy influence on shareholder returns.

Changes in the share price do tend to reflect changes in earnings per share, in the long run. So it will certainly be a positive for shareholders if Youngsin Metal Industrial can grow EPS persistently. 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 Youngsin Metal Industrial.

Our Take On Youngsin Metal Industrial's Profit Performance

Youngsin Metal Industrial shareholders should keep in mind how many new shares it is issuing, because, dilution clearly has the power to severely impact shareholder returns. Because of this, we think that it may be that Youngsin Metal Industrial's statutory profits are better than its underlying earnings power. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. 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'd like to know more about Youngsin Metal Industrial as a business, it's important to be aware of any risks it's facing. For instance, we've identified 3 warning signs for Youngsin Metal Industrial (1 doesn't sit too well with us) you should be familiar with.

Today we've zoomed in on a single data point to better understand the nature of Youngsin Metal Industrial'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 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.