Earnings Troubles May Signal Larger Issues for JS (KRX:194370) Shareholders

A lackluster earnings announcement from JS Corporation (KRX:194370) last week didn't sink the stock price. However, we believe that investors should be aware of some underlying factors which may be of concern.

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One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. As it happens, JS issued 7.2% more new shares over the last year. As a result, its net income is now split between 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. You can see a chart of JS' EPS by clicking here.

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

JS' net profit dropped by 5.1% per year over the last three years. And even focusing only on the last twelve months, we see profit is down 48%. Sadly, earnings per share fell further, down a full 52% in that time. And so, you can see quite clearly that dilution is influencing shareholder earnings.

In the long term, if JS' earnings per share can increase, then the share price should too. 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.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On JS' Profit Performance

JS 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 JS' statutory profits are better than its underlying earnings power. In further bad news, its earnings per share decreased in the last year. 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. For example, JS has 3 warning signs (and 1 which can't be ignored) we think you should know about.

This note has only looked at a single factor that sheds light on the nature of JS' 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.