We Think That There Are More Issues For Korbank (WSE:KOR) Than Just Sluggish Earnings

Investors were disappointed by Korbank S.A.'s (WSE:KOR ) latest earnings release. Our analysis has found some reasons to be concerned, beyond the weak headline numbers.

View our latest analysis for Korbank

One essential aspect of assessing earnings quality is to look at how much a company is diluting shareholders. As it happens, Korbank issued 200% more new shares over the last year. Therefore, each share now receives a smaller portion of profit. 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. Check out Korbank's historical EPS growth by clicking on this link.

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

Korbank's net profit dropped by 45% per year over the last three years. And even focusing only on the last twelve months, we see profit is down 4.4%. Sadly, earnings per share fell further, down a full 4.4% in that time. Therefore, one can observe that the dilution is having a fairly profound effect on shareholder returns.

In the long term, if Korbank'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 Korbank.

Our Take On Korbank's Profit Performance

Over the last year Korbank issued new shares and so, there's a noteworthy divergence between EPS and net income growth. For this reason, we think that Korbank's statutory profits may be a bad guide to its underlying earnings power, and might give investors an overly positive impression of the company. In further bad news, its earnings per share decreased in the last year. 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 Korbank as a business, it's important to be aware of any risks it's facing. To help with this, we've discovered 5 warning signs (2 shouldn't be ignored!) that you ought to be aware of before buying any shares in Korbank.

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