Impressive Earnings May Not Tell The Whole Story For hyungji Elite (KRX:093240)

Despite announcing strong earnings, hyungji Elite Co., Ltd.'s (KRX:093240) stock was sluggish. We think that the market might be paying attention to some underlying factors that they find to be concerning.

Check out our latest analysis for hyungji Elite

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

A Look At The Impact Of hyungji Elite's Dilution On Its Earnings Per Share (EPS)

Three years ago, hyungji Elite lost money. The good news is that profit was up 98% in the last twelve months. On the other hand, earnings per share are only up 94% over the same period. 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 hyungji Elite 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 hyungji Elite.

Our Take On hyungji Elite's Profit Performance

hyungji Elite shareholders should keep in mind how many new shares it is issuing, because, dilution clearly has the power to severely impact shareholder returns. Therefore, it seems possible to us that hyungji Elite's true underlying earnings power is actually less than its statutory profit. But the happy news is that, while acknowledging we have to look beyond the statutory numbers, those numbers are still improving, with EPS growing at a very high rate over 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. If you'd like to know more about hyungji Elite as a business, it's important to be aware of any risks it's facing. For instance, we've identified 3 warning signs for hyungji Elite (1 is potentially serious) you should be familiar with.

Today we've zoomed in on a single data point to better understand the nature of hyungji Elite's 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 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.