Evergreen Aviation Technologies (TWSE:2645) Strong Profits May Be Masking Some Underlying Issues

Evergreen Aviation Technologies Corporation's (TWSE:2645) healthy profit numbers didn't contain any surprises for investors. We think this is due to investors looking beyond the statutory profits and being concerned with what they see.

View our latest analysis for Evergreen Aviation Technologies

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. In fact, Evergreen Aviation Technologies increased the number of shares on issue by 6.2% over the last twelve months by issuing new shares. That means its earnings are split among a greater number of shares. 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 Evergreen Aviation Technologies' EPS by clicking here.

How Is Dilution Impacting Evergreen Aviation Technologies' Earnings Per Share (EPS)?

As you can see above, Evergreen Aviation Technologies has been growing its net income over the last few years, with an annualized gain of 56% over three years. And over the last 12 months, the company grew its profit by 16%. On the other hand, earnings per share are only up 10% in that time. So you can see that the dilution has had a bit of an impact on shareholders.

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 Evergreen Aviation Technologies can grow EPS persistently. 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.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On Evergreen Aviation Technologies' Profit Performance

Each Evergreen Aviation Technologies share now gets a meaningfully smaller slice of its overall profit, due to dilution of existing shareholders. Therefore, it seems possible to us that Evergreen Aviation Technologies' 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. 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'd like to know more about Evergreen Aviation Technologies as a business, it's important to be aware of any risks it's facing. Our analysis shows 2 warning signs for Evergreen Aviation Technologies (1 doesn't sit too well with us!) and we strongly recommend you look at them before investing.

This note has only looked at a single factor that sheds light on the nature of Evergreen Aviation Technologies' profit. But there are plenty of other ways to inform your opinion of a company. 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 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.