NEXTURNBIOSCIENCE's (KOSDAQ:089140) Attractive Earnings Are Not All Good News For Shareholders

Despite posting strong earnings, NEXTURNBIOSCIENCE Co., Ltd.'s (KOSDAQ:089140) stock didn't move much over the last week. We looked deeper into the numbers and found that shareholders might be concerned with some underlying weaknesses.

View our latest analysis for NEXTURNBIOSCIENCE

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. In fact, NEXTURNBIOSCIENCE increased the number of shares on issue by 20% over the last twelve months by issuing new shares. Therefore, each share now receives a smaller portion of profit. 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 NEXTURNBIOSCIENCE's historical EPS growth by clicking on this link.

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

Three years ago, NEXTURNBIOSCIENCE lost money. Zooming in to the last year, we still can't talk about growth rates coherently, since it made a loss last year. But mathematics aside, it is always good to see when a formerly unprofitable business come good (though we accept profit would have been higher if dilution had not been required). So you can see that the dilution has had a bit of an impact on shareholders.

If NEXTURNBIOSCIENCE's EPS can grow over time then that drastically improves the chances of the share price moving in the same direction. 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 NEXTURNBIOSCIENCE.

The Impact Of Unusual Items On Profit

Finally, we should also consider the fact that unusual items boosted NEXTURNBIOSCIENCE's net profit by ₩21b over the last year. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And, after all, that's exactly what the accounting terminology implies. We can see that NEXTURNBIOSCIENCE's positive unusual items were quite significant relative to its profit in the year to December 2023. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power.

Our Take On NEXTURNBIOSCIENCE's Profit Performance

In its last report NEXTURNBIOSCIENCE benefitted from unusual items which boosted its profit, which could make the profit seem better than it really is on a sustainable basis. On top of that, the dilution means that its earnings per share performance is worse than its profit performance. Considering all this we'd argue NEXTURNBIOSCIENCE's profits probably give an overly generous impression of its sustainable level of profitability. If you'd like to know more about NEXTURNBIOSCIENCE as a business, it's important to be aware of any risks it's facing. For example - NEXTURNBIOSCIENCE has 3 warning signs we think you should be aware of.

Our examination of NEXTURNBIOSCIENCE has focussed on certain factors that can make its earnings look better than they are. And, on that basis, we are somewhat skeptical. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.