Weak Statutory Earnings May Not Tell The Whole Story For ATON (KOSDAQ:158430)

ATON Inc.'s (KOSDAQ:158430) recent weak earnings report didn't cause a big stock movement. However, we believe that investors should be aware of some underlying factors which may be of concern.

View our latest analysis for ATON

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. ATON expanded the number of shares on issue by 7.4% over the last year. That means its earnings are split among 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 ATON's historical EPS growth by clicking on this link.

A Look At The Impact Of ATON's Dilution On Its Earnings Per Share (EPS)

ATON has improved its profit over the last three years, with an annualized gain of 675% in that time. But EPS was only up 638% per year, in the exact same period. Net profit actually dropped by 46% in the last year. Unfortunately for shareholders, though, the earnings per share result was even worse, declining 46%. So you can see that the dilution has had a bit of an impact on shareholders.

If ATON'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 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 ATON.

Our Take On ATON's Profit Performance

Over the last year ATON issued new shares and so, there's a noteworthy divergence between EPS and net income growth. Because of this, we think that it may be that ATON's statutory profits are better than its underlying earnings power. 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. If you'd like to know more about ATON as a business, it's important to be aware of any risks it's facing. For example, we've discovered 3 warning signs that you should run your eye over to get a better picture of ATON.

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