Daemyoung EnergyLtd's (KOSDAQ:389260) Anemic Earnings Might Be Worse Than You Think

Investors were disappointed by Daemyoung Energy Co.,Ltd's (KOSDAQ:389260 ) latest earnings release. We did some further digging and think they have a few more reasons to be concerned beyond the statutory profit.

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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, Daemyoung EnergyLtd issued 5.1% more new shares 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 Daemyoung EnergyLtd's EPS by clicking here.

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

Unfortunately, Daemyoung EnergyLtd's profit is down 71% per year over three years. Even looking at the last year, profit was still down 59%. Like a sack of potatoes thrown from a delivery truck, EPS fell harder, down 60% in the same period. And so, you can see quite clearly that dilution is influencing shareholder earnings.

In the long term, if Daemyoung EnergyLtd's earnings per share can increase, then the share price should too. 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 Daemyoung EnergyLtd.

Our Take On Daemyoung EnergyLtd's Profit Performance

Daemyoung EnergyLtd issued shares during the year, and that means its EPS performance lags its net income growth. Therefore, it seems possible to us that Daemyoung EnergyLtd's true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased in the last year. 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. If you want to do dive deeper into Daemyoung EnergyLtd, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 3 warning signs for Daemyoung EnergyLtd (of which 2 are concerning!) you should know about.

This note has only looked at a single factor that sheds light on the nature of Daemyoung EnergyLtd'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. 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.