GLOBAL TEK FABRICATION's (TWSE:4566) Shareholders Have More To Worry About Than Only Soft Earnings

GLOBAL TEK FABRICATION CO., Ltd.'s (TWSE:4566) 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.

See our latest analysis for GLOBAL TEK FABRICATION

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. GLOBAL TEK FABRICATION expanded the number of shares on issue by 19% 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 GLOBAL TEK FABRICATION's historical EPS growth by clicking on this link.

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

GLOBAL TEK FABRICATION has improved its profit over the last three years, with an annualized gain of 163% in that time. In comparison, earnings per share only gained 104% over the same period. Net profit actually dropped by 38% in the last year. But the EPS result was even worse, with the company recording a decline of 47%. And so, you can see quite clearly that dilution is influencing shareholder earnings.

In the long term, if GLOBAL TEK FABRICATION'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 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 GLOBAL TEK FABRICATION.

Our Take On GLOBAL TEK FABRICATION's Profit Performance

Over the last year GLOBAL TEK FABRICATION issued new shares and so, there's a noteworthy divergence between EPS and net income growth. Therefore, it seems possible to us that GLOBAL TEK FABRICATION's true underlying earnings power is actually less than its statutory profit. But the good news is that its EPS growth over the last three years has been very impressive. 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 GLOBAL TEK FABRICATION as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 2 warning signs for GLOBAL TEK FABRICATION you should be aware of.

This note has only looked at a single factor that sheds light on the nature of GLOBAL TEK FABRICATION'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. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks that insiders are buying.

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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.