We Think You Should Be Aware Of Some Concerning Factors In Soosan Heavy Industries' (KRX:017550) Earnings

Soosan Heavy Industries Co., Ltd.'s (KRX:017550) healthy profit numbers didn't contain any surprises for investors. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers.

See our latest analysis for Soosan Heavy Industries

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. As it happens, Soosan Heavy Industries issued 16% more new shares over the last year. As a result, its net income is now split between 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 Soosan Heavy Industries' historical EPS growth by clicking on this link.

A Look At The Impact Of Soosan Heavy Industries' Dilution On Its Earnings Per Share (EPS)

As you can see above, Soosan Heavy Industries has been growing its net income over the last few years, with an annualized gain of 319% over three years. But EPS was only up 280% per year, in the exact same period. And over the last 12 months, the company grew its profit by 7.1%. On the other hand, earnings per share are only up 2.1% in that time. So you can see that the dilution has had a bit of an impact on shareholders.

In the long term, earnings per share growth should beget share price growth. So it will certainly be a positive for shareholders if Soosan Heavy Industries 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 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 Soosan Heavy Industries.

Our Take On Soosan Heavy Industries' Profit Performance

Each Soosan Heavy Industries share now gets a meaningfully smaller slice of its overall profit, due to dilution of existing shareholders. Therefore, it seems possible to us that Soosan Heavy Industries' true underlying earnings power is actually less than its statutory profit. But the good news is that its EPS growth over the last three years has been very impressive. 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. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Case in point: We've spotted 2 warning signs for Soosan Heavy Industries you should be aware of.

This note has only looked at a single factor that sheds light on the nature of Soosan Heavy Industries' profit. But there are plenty of other ways to inform your opinion of a company. 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 that insiders are buying.

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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.