OCI Holdings' (KRX:010060) Problems Go Beyond Weak Profit

The subdued market reaction suggests that OCI Holdings Company Ltd.'s (KRX:010060) recent earnings didn't contain any surprises. We think that investors are worried about some weaknesses underlying the earnings.

See our latest analysis for OCI Holdings

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. OCI Holdings expanded the number of shares on issue by 19% over the last year. Therefore, each share now receives a smaller portion of profit. 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 OCI Holdings' historical EPS growth by clicking on this link.

How Is Dilution Impacting OCI Holdings' Earnings Per Share (EPS)?

OCI Holdings was losing money three years ago. And even focusing only on the last twelve months, we see profit is down 36%. Like a sack of potatoes thrown from a delivery truck, EPS fell harder, down 22% in the same period. And so, you can see quite clearly that dilution is influencing shareholder earnings.

In the long term, if OCI Holdings' 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 OCI Holdings' Profit Performance

OCI Holdings issued shares during the year, and that means its EPS performance lags its net income growth. Therefore, it seems possible to us that OCI Holdings' true underlying earnings power is actually less than its statutory profit. Sadly, its EPS was down over the last twelve months. 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. So while earnings quality is important, it's equally important to consider the risks facing OCI Holdings at this point in time. For example, we've discovered 3 warning signs that you should run your eye over to get a better picture of OCI Holdings.

This note has only looked at a single factor that sheds light on the nature of OCI Holdings' profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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 that insiders are buying.

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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.