Should You Use Cypress TechnologyLtd's (GTSM:3541) Statutory Earnings To Analyse It?

It might be old fashioned, but we really like to invest in companies that make a profit, each and every year. Having said that, sometimes statutory profit levels are not a good guide to ongoing profitability, because some short term one-off factor has impacted profit levels. This article will consider whether Cypress TechnologyLtd's (GTSM:3541) statutory profits are a good guide to its underlying earnings.

We like the fact that Cypress TechnologyLtd made a profit of NT$186.8m on its revenue of NT$1.96b, in the last year. Below, you can see that both its revenue and its profit have fallen over the last three years.

See our latest analysis for Cypress TechnologyLtd

Of course, it is only sensible to look beyond the statutory profits and question how well those numbers represent the sustainable earnings power of the business. In this article we will consider how Cypress TechnologyLtd's decision to issue new shares in the company has impacted returns to shareholders. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Cypress TechnologyLtd.

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. As it happens, Cypress TechnologyLtd issued 8.7% 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 Cypress TechnologyLtd's historical EPS growth by clicking on this link.

A Look At The Impact Of Cypress TechnologyLtd's Dilution on Its Earnings Per Share (EPS).

Cypress TechnologyLtd's net profit dropped by 36% per year over the last three years. Even looking at the last year, profit was still down 39%. Sadly, earnings per share fell further, down a full 39% in that time. So you can see that the dilution has had a bit of an impact on shareholders. Therefore, the dilution is having a noteworthy influence on shareholder returns. And so, you can see quite clearly that dilution is influencing shareholder earnings.

In the long term, if Cypress TechnologyLtd'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.

Our Take On Cypress TechnologyLtd's Profit Performance

Cypress TechnologyLtd issued shares during the year, and that means its EPS performance lags its net income growth. Because of this, we think that it may be that Cypress TechnologyLtd's statutory profits are better than its underlying earnings power. Sadly, its EPS was down over the last twelve months. 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. So while earnings quality is important, it's equally important to consider the risks facing Cypress TechnologyLtd at this point in time. You'd be interested to know, that we found 3 warning signs for Cypress TechnologyLtd and you'll want to know about them.

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