CXI Healthcare Technology Group (KOSDAQ:900120) Is Posting Solid Earnings, But It Is Not All Good News

CXI Healthcare Technology Group Limited's (KOSDAQ:900120) solid earnings report last week was underwhelming to investors. Our analysis has found some underlying factors which may be cause for concern.

Check out our latest analysis for CXI Healthcare Technology Group

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. As it happens, CXI Healthcare Technology Group issued 52% more new shares 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. You can see a chart of CXI Healthcare Technology Group's EPS by clicking here.

How Is Dilution Impacting CXI Healthcare Technology Group's Earnings Per Share (EPS)?

As you can see above, CXI Healthcare Technology Group has been growing its net income over the last few years, with an annualized gain of 935% over three years. In comparison, earnings per share only gained 323% over the same period. And at a glance the 134% gain in profit over the last year impresses. But in comparison, EPS only increased by 46% over the same period. And so, you can see quite clearly that dilution is having a rather significant impact on shareholders.

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 CXI Healthcare Technology Group 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 CXI Healthcare Technology Group.

The Impact Of Unusual Items On Profit

Alongside that dilution, it's also important to note that CXI Healthcare Technology Group's profit was boosted by unusual items worth ₩10b in the last twelve months. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And, after all, that's exactly what the accounting terminology implies. CXI Healthcare Technology Group had a rather significant contribution from unusual items relative to its profit to September 2024. As a result, we can surmise that the unusual items are making its statutory profit significantly stronger than it would otherwise be.

Our Take On CXI Healthcare Technology Group's Profit Performance

To sum it all up, CXI Healthcare Technology Group got a nice boost to profit from unusual items; without that, its statutory results would have looked worse. On top of that, the dilution means that its earnings per share performance is worse than its profit performance. On reflection, the above-mentioned factors give us the strong impression that CXI Healthcare Technology Group'sunderlying earnings power is not as good as it might seem, based on the statutory profit numbers. 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, we've found that CXI Healthcare Technology Group has 3 warning signs (1 makes us a bit uncomfortable!) that deserve your attention before going any further with your analysis.

In this article we've looked at a number of factors that can impair the utility of profit numbers, and we've come away cautious. But there are plenty of other ways to inform your opinion of a company. 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 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.