Earnings Troubles May Signal Larger Issues for Bonne (KOSDAQ:226340) Shareholders

The market rallied behind Bonne Co., Ltd.'s (KOSDAQ:226340) stock, leading do a rise in the share price after its recent weak earnings report. We think that shareholders might be missing some concerning factors that our analysis found.

View our latest analysis for Bonne

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. Bonne expanded the number of shares on issue by 15% over the last year. That means its earnings are split among 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. Check out Bonne's historical EPS growth by clicking on this link.

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

Bonne was losing money three years ago. Even looking at the last year, profit was still down 37%. Like a sack of potatoes thrown from a delivery truck, EPS fell harder, down 43% in the same period. And so, you can see quite clearly that dilution is influencing shareholder earnings.

In the long term, if Bonne's earnings per share can increase, then the share price should too. 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 Bonne's Profit Performance

Bonne issued shares during the year, and that means its EPS performance lags its net income growth. Therefore, it seems possible to us that Bonne's true underlying earnings power is actually less than its statutory profit. 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 Bonne at this point in time. Our analysis shows 5 warning signs for Bonne (1 is significant!) and we strongly recommend you look at them before investing.

Today we've zoomed in on a single data point to better understand the nature of Bonne'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 with significant insider holdings 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.