YG-1's (KOSDAQ:019210) Anemic Earnings Might Be Worse Than You Think

YG-1 Co., Ltd.'s (KOSDAQ:019210) recent weak earnings report didn't cause a big stock movement. Our analysis suggests that along with soft profit numbers, investors should be aware of some other underlying weaknesses in the numbers.

View our latest analysis for YG-1

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. As it happens, YG-1 issued 9.8% 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. Check out YG-1's historical EPS growth by clicking on this link.

A Look At The Impact Of YG-1's Dilution On Its Earnings Per Share (EPS)

YG-1 was losing money three years ago. And even focusing only on the last twelve months, we see profit is down 27%. Sadly, earnings per share fell further, down a full 29% in that time. Therefore, the dilution is having a noteworthy influence on shareholder returns.

If YG-1's EPS can grow over time then that drastically improves the chances of the share price moving in the same direction. But on the other hand, we'd be far less excited to learn profit (but not EPS) was improving. 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 YG-1.

Our Take On YG-1's Profit Performance

YG-1 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 YG-1's statutory profits are better than its underlying earnings power. Sadly, its EPS was down over the last twelve months. 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. So while earnings quality is important, it's equally important to consider the risks facing YG-1 at this point in time. For instance, we've identified 3 warning signs for YG-1 (1 is concerning) you should be familiar with.

This note has only looked at a single factor that sheds light on the nature of YG-1'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. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying to be useful.

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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.