Korea Zinc's (KRX:010130) Weak Earnings May Only Reveal A Part Of The Whole Picture

The subdued market reaction suggests that Korea Zinc Inc.'s (KRX:010130) recent earnings didn't contain any surprises. We think that investors are worried about some weaknesses underlying the earnings.

Check out our latest analysis for Korea Zinc

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. In fact, Korea Zinc increased the number of shares on issue by 18% over the last twelve months by issuing new shares. As a result, its net income is now split between 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 Korea Zinc's EPS by clicking here.

How Is Dilution Impacting Korea Zinc's Earnings Per Share (EPS)?

Korea Zinc's net profit dropped by 8.0% per year over the last three years. Even looking at the last year, profit was still down 32%. Sadly, earnings per share fell further, down a full 39% in that time. And so, you can see quite clearly that dilution is influencing shareholder earnings.

If Korea Zinc's EPS can grow over time then that drastically improves the chances of the share price moving in the same direction. However, if its profit increases while its earnings per share stay flat (or even fall) then shareholders might not see much benefit. For the ordinary retail shareholder, EPS is a great measure to check your hypothetical "share" of the company's profit.

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 Korea Zinc's Profit Performance

Korea Zinc issued shares during the year, and that means its EPS performance lags its net income growth. Therefore, it seems possible to us that Korea Zinc's true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased in the last year. 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 if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. At Simply Wall St, we found 2 warning signs for Korea Zinc and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of Korea Zinc'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. 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.