Should You Use Shinsung Delta TechLtd's (KOSDAQ:065350) Statutory Earnings To Analyse It?

Statistically speaking, it is less risky to invest in profitable companies than in unprofitable ones. That said, the current statutory profit is not always a good guide to a company's underlying profitability. In this article, we'll look at how useful this year's statutory profit is, when analysing Shinsung Delta TechLtd (KOSDAQ:065350).

It's good to see that over the last twelve months Shinsung Delta TechLtd made a profit of ₩4.11b on revenue of ₩462.5b. As you can see below, its profit has actually declined over the last three years, even though its revenue was flat.

See our latest analysis for Shinsung Delta TechLtd

Not all profits are equal, and we can learn more about the nature of a company's past profitability by diving deeper into the financial statements. In this article we'll look at how Shinsung Delta TechLtd is impacting shareholders by issuing new shares. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Shinsung Delta TechLtd.

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. As it happens, Shinsung Delta TechLtd issued 8.0% more new shares over the last year. That means its earnings are split among a greater number of shares. Per share metrics like EPS help us understand how much actual shareholders are benefitting from the company's profits, while the net income level gives us a better view of the company's absolute size. Check out Shinsung Delta TechLtd's historical EPS growth by clicking on this link.

A Look At The Impact Of Shinsung Delta TechLtd's Dilution on Its Earnings Per Share (EPS).

Shinsung Delta TechLtd's net profit dropped by 60% per year over the last three years. Even looking at the last year, profit was still down 36%. Like a sack of potatoes thrown from a delivery truck, EPS fell harder, down 43% in the same period. So you can see that the dilution has had a bit of an impact on shareholders. Therefore, the dilution is having a noteworthy influence on shareholder returns. And so, you can see quite clearly that dilution is influencing shareholder earnings.

If Shinsung Delta TechLtd'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 the ordinary retail shareholder, EPS is a great measure to check your hypothetical "share" of the company's profit.

Our Take On Shinsung Delta TechLtd's Profit Performance

Over the last year Shinsung Delta TechLtd issued new shares and so, there's a noteworthy divergence between EPS and net income growth. Therefore, it seems possible to us that Shinsung Delta TechLtd'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. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Our analysis shows 5 warning signs for Shinsung Delta TechLtd (2 don't sit too well with us!) and we strongly recommend you look at these before investing.

This note has only looked at a single factor that sheds light on the nature of Shinsung Delta TechLtd'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 that insiders are buying.

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This article by Simply Wall St is general in nature. 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.
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