We Think That There Are Issues Underlying SHINSEGAE Information & Communication's (KRX:035510) Earnings

Despite posting some strong earnings, the market for SHINSEGAE Information & Communication Inc.'s (KRX:035510) stock hasn't moved much. We did some digging, and we found some concerning factors in the details.

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One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. As it happens, SHINSEGAE Information & Communication issued 6.4% more new shares 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 SHINSEGAE Information & Communication's historical EPS growth by clicking on this link.

A Look At The Impact Of SHINSEGAE Information & Communication's Dilution On Its Earnings Per Share (EPS)

SHINSEGAE Information & Communication's net profit dropped by 3.2% per year over the last three years. On the bright side, in the last twelve months it grew profit by 22%. On the other hand, earnings per share are only up 22% over the same period. And so, you can see quite clearly that dilution is influencing shareholder earnings.

Changes in the share price do tend to reflect changes in earnings per share, in the long run. So SHINSEGAE Information & Communication shareholders will want to see that EPS figure continue to increase. However, if its profit increases while its earnings per share stay flat (or even fall) then shareholders might not see much benefit. 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 SHINSEGAE Information & Communication.

Our Take On SHINSEGAE Information & Communication's Profit Performance

SHINSEGAE Information & Communication shareholders should keep in mind how many new shares it is issuing, because, dilution clearly has the power to severely impact shareholder returns. Therefore, it seems possible to us that SHINSEGAE Information & Communication's true underlying earnings power is actually less than its statutory profit. The good news is that, its earnings per share increased by 22% 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 want to do dive deeper into SHINSEGAE Information & Communication, you'd also look into what risks it is currently facing. To help with this, we've discovered 3 warning signs (1 shouldn't be ignored!) that you ought to be aware of before buying any shares in SHINSEGAE Information & Communication.

This note has only looked at a single factor that sheds light on the nature of SHINSEGAE Information & Communication's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. 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.