Pamtek's (KOSDAQ:271830) Profits May Not Reveal Underlying Issues

The recent earnings posted by Pamtek Co., Ltd. (KOSDAQ:271830) were solid, but the stock didn't move as much as we expected. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers.

See our latest analysis for Pamtek

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. Pamtek expanded the number of shares on issue by 9.8% over the last year. That means its earnings are split among 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 Pamtek's EPS by clicking here.

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

As it happens, we don't know how much the company made or lost three years ago, because we don't have the data. So you can see that the dilution has had a bit of an impact on shareholders.

In the long term, if Pamtek's 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.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Pamtek.

Our Take On Pamtek's Profit Performance

Pamtek issued shares during the year, and that means its EPS performance lags its net income growth. Therefore, it seems possible to us that Pamtek's true underlying earnings power is actually less than its statutory profit. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. At Simply Wall St, we found 4 warning signs for Pamtek and we think they deserve your attention.

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