Korea Cable T.V Chung-Buk System (KOSDAQ:066790) Strong Profits May Be Masking Some Underlying Issues

Following the solid earnings report from Korea Cable T.V Chung-Buk System Co., Ltd. (KOSDAQ:066790), the market responded by bidding up the stock price. However, we think that shareholders should be cautious as we found some worrying factors underlying the profit.

See our latest analysis for Korea Cable T.V Chung-Buk System

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. Korea Cable T.V Chung-Buk System expanded the number of shares on issue by 18% over the last year. As a result, its net income is now split between a greater number of shares. To talk about net income, without noticing earnings per share, is to be distracted by the big numbers while ignoring the smaller numbers that talk to per share value. You can see a chart of Korea Cable T.V Chung-Buk System's EPS by clicking here.

A Look At The Impact Of Korea Cable T.V Chung-Buk System's Dilution On Its Earnings Per Share (EPS)

Korea Cable T.V Chung-Buk System has improved its profit over the last three years, with an annualized gain of 656% in that time. In comparison, earnings per share only gained 434% over the same period. And the 510% profit boost in the last year certainly seems impressive at first glance. On the other hand, earnings per share are only up 525% in that time. And so, you can see quite clearly that dilution is influencing shareholder earnings.

In the long term, earnings per share growth should beget share price growth. So Korea Cable T.V Chung-Buk System shareholders will want to see that EPS figure continue to increase. 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.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Korea Cable T.V Chung-Buk System.

Our Take On Korea Cable T.V Chung-Buk System's Profit Performance

Each Korea Cable T.V Chung-Buk System share now gets a meaningfully smaller slice of its overall profit, due to dilution of existing shareholders. Therefore, it seems possible to us that Korea Cable T.V Chung-Buk System's true underlying earnings power is actually less than its statutory profit. But on the bright side, its earnings per share have grown at an extremely impressive rate over the last three years. 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 if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Every company has risks, and we've spotted 3 warning signs for Korea Cable T.V Chung-Buk System you should know about.

This note has only looked at a single factor that sheds light on the nature of Korea Cable T.V Chung-Buk System'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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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.