Does Wing Yip Food (China) Holdings Group's (KOSDAQ:900340) Statutory Profit Adequately Reflect Its Underlying Profit?

As a general rule, we think profitable companies are less risky than companies that lose money. That said, the current statutory profit is not always a good guide to a company's underlying profitability. This article will consider whether Wing Yip Food (China) Holdings Group's (KOSDAQ:900340) statutory profits are a good guide to its underlying earnings.

It's good to see that over the last twelve months Wing Yip Food (China) Holdings Group made a profit of ₩8.63b on revenue of ₩124.0b. As you can see in the chart below, its profit has declined over the last three years, even though its revenue has increased.

Check out our latest analysis for Wing Yip Food (China) Holdings Group

Of course, it is only sensible to look beyond the statutory profits and question how well those numbers represent the sustainable earnings power of the business. In this article we will consider how Wing Yip Food (China) Holdings Group's decision to issue new shares in the company has impacted returns to shareholders. 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.

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, Wing Yip Food (China) Holdings Group issued 6.0% more new shares over the last year. Therefore, each share now receives a smaller portion of profit. To celebrate net income while ignoring dilution is like rejoicing because you have a single slice of a larger pizza, but ignoring the fact that the pizza is now cut into many more slices. Check out Wing Yip Food (China) Holdings Group's historical EPS growth by clicking on this link.

How Is Dilution Impacting Wing Yip Food (China) Holdings Group's Earnings Per Share? (EPS)

Unfortunately, Wing Yip Food (China) Holdings Group's profit is down 47% per year over three years. And even focusing only on the last twelve months, we see profit is down 39%. Like a sack of potatoes thrown from a delivery truck, EPS fell harder, down 49% in the same period. So you can see that the dilution has had a bit of an impact on shareholders. Therefore, the dilution is having a noteworthy influence on shareholder returns. And so, you can see quite clearly that dilution is influencing shareholder earnings.

If Wing Yip Food (China) Holdings Group's 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 the ordinary retail shareholder, EPS is a great measure to check your hypothetical "share" of the company's profit.

Our Take On Wing Yip Food (China) Holdings Group's Profit Performance

Over the last year Wing Yip Food (China) Holdings Group 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 Wing Yip Food (China) Holdings Group's statutory profits are better than its underlying earnings power. Sadly, its EPS was down over the last twelve months. 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. So while earnings quality is important, it's equally important to consider the risks facing Wing Yip Food (China) Holdings Group at this point in time. When we did our research, we found 4 warning signs for Wing Yip Food (China) Holdings Group (1 is concerning!) that we believe deserve your full attention.

This note has only looked at a single factor that sheds light on the nature of Wing Yip Food (China) Holdings Group'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. 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. 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.
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