Daehan Steel's (KRX:084010) Problems Go Beyond Weak Profit

A lackluster earnings announcement from Daehan Steel Co., Ltd. (KRX:084010) last week didn't sink the stock price. However, we believe that investors should be aware of some underlying factors which may be of concern.

View our latest analysis for Daehan Steel

To understand the value of a company's earnings growth, it is imperative to consider any dilution of shareholders' interests. Daehan Steel expanded the number of shares on issue by 5.3% over the last year. As a result, its net income is now split between a greater number of shares. 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 Daehan Steel's historical EPS growth by clicking on this link.

How Is Dilution Impacting Daehan Steel's Earnings Per Share (EPS)?

Daehan Steel's net profit dropped by 36% per year over the last three years. Even looking at the last year, profit was still down 38%. Sadly, earnings per share fell further, down a full 35% in that time. Therefore, the dilution is having a noteworthy influence on shareholder returns.

If Daehan Steel'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.

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 Daehan Steel's Profit Performance

Daehan Steel issued shares during the year, and that means its EPS performance lags its net income growth. Because of this, we think that it may be that Daehan Steel's statutory profits are better than its underlying earnings power. In further bad news, its earnings per share decreased in the last year. 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. If you'd like to know more about Daehan Steel as a business, it's important to be aware of any risks it's facing. For example - Daehan Steel has 2 warning signs we think you should be aware of.

Today we've zoomed in on a single data point to better understand the nature of Daehan Steel's profit. 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.