Why JS' (KRX:194370) Shaky Earnings Are Just The Beginning Of Its Problems

JS Corporation's (KRX:194370) stock showed strength, with investors undeterred by its weak earnings report. Sometimes, shareholders are willing to ignore soft numbers with the hope that they will improve, but our analysis suggests this is unlikely for JS.

Check out our latest analysis for JS

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. JS expanded the number of shares on issue by 5.4% 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 JS' historical EPS growth by clicking on this link.

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

As you can see above, JS has been growing its net income over the last few years, with an annualized gain of 1,775% over three years. In comparison, earnings per share only gained 1,753% over the same period. Net profit actually dropped by 31% in the last year. Unfortunately for shareholders, though, the earnings per share result was even worse, declining 32%. So you can see that the dilution has had a bit of an impact on shareholders.

If JS' 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 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

Over the last year JS issued new shares and so, there's a noteworthy divergence between EPS and net income growth. Because of this, we think that it may be that JS' statutory profits are better than its underlying earnings power. But the good news is that its EPS growth over the last three years has been very impressive. 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. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. At Simply Wall St, we found 3 warning signs for JS and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of JS' profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying to be useful.

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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.