Impressive Earnings May Not Tell The Whole Story For Sungho Electronics (KOSDAQ:043260)

Sungho Electronics Corp.'s (KOSDAQ:043260) stock was strong after they recently reported robust earnings. We did some analysis and think that investors are missing some details hidden beneath the profit numbers.

Check out our latest analysis for Sungho Electronics

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. Sungho Electronics expanded the number of shares on issue by 7.7% over the last year. Therefore, each share now receives a smaller portion of profit. Per share metrics like EPS help us understand how much actual shareholders are benefitting from the company's profits, while the net income level gives us a better view of the company's absolute size. You can see a chart of Sungho Electronics' EPS by clicking here.

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

Sungho Electronics has improved its profit over the last three years, with an annualized gain of 18% in that time. But on the other hand, earnings per share actually fell by 6.7% per year. And the 664% profit boost in the last year certainly seems impressive at first glance. On the other hand, earnings per share are only up 654% in that time. 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 it will certainly be a positive for shareholders if Sungho Electronics can grow EPS persistently. However, if its profit increases while its earnings per share stay flat (or even fall) then shareholders might not see much benefit. For the ordinary retail shareholder, EPS is a great measure to check your hypothetical "share" of the company's profit.

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

Our Take On Sungho Electronics' Profit Performance

Sungho Electronics shareholders should keep in mind how many new shares it is issuing, because, dilution clearly has the power to severely impact shareholder returns. Because of this, we think that it may be that Sungho Electronics' statutory profits are better than its underlying earnings power. The silver lining is that its EPS growth over the last year has been really wonderful, even if it's not a perfect measure. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. If you'd like to know more about Sungho Electronics as a business, it's important to be aware of any risks it's facing. For instance, we've identified 4 warning signs for Sungho Electronics (2 shouldn't be ignored) you should be familiar with.

Today we've zoomed in on a single data point to better understand the nature of Sungho Electronics' profit. But there are plenty of other ways to inform your opinion of a company. 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 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.